VATLive > Blog > Europe > EU closes VAT Gap by €8bn to €137.5bn for 2017

EU closes missing VAT Gap by €8bn to €138bn for 2017

  • Sep 5, 2019 | Richard Asquith

The European Commission (EC) annual estimate of uncollected EU VAT, the VAT gap, has reduced from €145.4 billion in 2016 to €137.5 billion for 2017. This is 11.2% of total EU VAT revenues, compared to 12.2% in 2016.

The gap has been shrinking for five years in a row now. However, the EC is still pushing its proposal to overhaul the EU VAT regime in 2022. The 'Definitive VAT Regime' would see the EU shift to a destination-based system where B2B VAT would be due on goods in the customer's country of residence. This reform would help tackle 'carousel fraud', which is estimated to account for €50 billion of the annual VAT gap.

The improvement came across 25 of the 28 EU member states. Poland, Malta and Cyprus showed the strongest performances in narrowing their national gaps.

Poland reduced its VAT gap from 20% to 14% in 2017, an improvement of €5.8bn. It is forecasting reducing this gap down to 9.5% in 2018, below the 10.1% average for the EU states.

Greece, Latvia and Germany had slight rises in their deficits. Romania continued to show the largest VAT Gap of the 28 EU member states, with 36% missing VAT collections. 

Italy’s VAT Gap, at €33.6 billion, represents almost 25% of the total EU VAT gap. There was, however, an improvement on 2016's performance, with its gap dropping from 27% of VAT receipts to 24%. Italy does not expect any progress on this in 2018. Although the 2019 extension of live invoice reporting, SdI, should mean a major improvement the year after.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara
VATlive newsletter