2022 EU VAT Gap Widens, Report Highlights Increased Revenue Losses

• The European Commission released a report on the VAT compliance gap in the EU for 2022
• The VAT gap increased by EUR 13.3 billion from 2021, totaling EUR 89 billion
• The increase in 2022 is seen as a stabilization after a significant drop from 2019 to 2021
• Over five years, the VAT gap decreased by about EUR 30 billion
• Reforms contributing to the long-term reduction include electronic declarations, real-time reporting, e-invoicing, online cash registers, streamlined tax systems, and digital payments
• The report introduced the concept of an actionable VAT policy gap, which is the revenue lost due to reduced rates and exemptions
• In 2022, the actionable VAT policy gap was 20% of the theoretical VAT revenue
• Eliminating exemptions and reduced rates could lower the EU’s average VAT rate to 16.6% while maintaining revenue neutrality
• The European Commission notes progress in narrowing the VAT compliance gap and expects further improvements with ongoing reforms and the introduction of VIDA

Source: meridianglobalservices.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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