- In 2024, the VAT actionable policy gap in the EU was six times larger than the compliance gap, representing €773.5 billion in lost revenue.
- Closing this gap could increase VAT revenues by one-third or allow for an average standard VAT rate reduction of 5.7 percentage points.
- The VAT actionable policy gap is mainly due to reduced rates and certain exemptions, which distort consumption, complicate compliance, and reduce revenue.
- Eliminating these reduced rates and exemptions could yield revenue four times the size of the EU’s 2026 budget.
- Some exemptions are unavoidable (e.g., imputed rents, public goods, financial services), but most reduced rates and exemptions are policy choices that could be reformed.
Source: taxfoundation.org
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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