European Commission VAT Gap Report 2025: EU Faces Billions in Lost VAT Revenue

• The European Union lost €128 billion in VAT revenue in 2023, increasing the VAT gap to 9.5% due to fraud, complex rules, administrative errors, and policy exemptions, reversing previous years of improvement.
• The losses are attributed to both a “compliance gap” (fraud, evasion, errors) and a “policy gap” (exemptions and reduced rates), with the latter accounting for over 50% of potential lost revenue.
• Digital solutions like e-invoicing and cross-border data sharing, along with stronger collaboration between businesses and governments, are crucial to reducing the VAT gap and improving compliance.

Source 1stopVAT

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