2023 Report on the VAT Gap released

The European Commission recently released its 2023 VAT Gap Report, which has exposed remarkable strides in Value-Added Tax (VAT) compliance across EU Member States in the year 2021.

The 2023 VAT Gap report shows that there has been a substantial reduction in the collective VAT revenue losses, plummeting from EUR99 billion in 2020 to EUR61 billion in 2021. These losses are acknowledged to be the result of various factors including VAT fraud, evasion, avoidance, non-fraudulent bankruptcies, miscalculations, and financial insolvencies.

The report outlines that targeted policy measures such as the digitisation of tax systems, real-time transaction reporting, and the adoption of e-invoicing had a significant impact on this positive change.

This is not to mention that temporary government support initiatives, often tied to tax payments, that were rolled out during the COVID-19 pandemic, have also played a pivotal role.

The collective VAT Gap reduction, totalling EUR38 billion across the EU was quite remarkable in some Member States, like Italy, which saw a 10,7% and Poland a 7,8% reduction, in their respective national VAT Gap figures.

The Netherlands, Finland, Spain, and Estonia reported the smallest gaps, primarily owing to their pre-existing low levels of non-compliance, although statistical and measurement inconsistencies may have played a part.

Key takeaway

This report represents a ground-breaking development in the EU’s pursuit of minimising VAT revenue losses and enhancing compliance, promising far-reaching implications for the European Union.