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EU VAT Gap shrinks to €160billion

  • Sep 5, 2016 | Richard Asquith

EU VAT Gap shrinks to €160billion

The estimate for ‘missing’ EU VAT, the ‘VAT Gap’ has fallen to €160billion as at 2014. This is a drop of €2.5 billion on 2013. The drop is being put down to an improving European economy and better fraud-detection measures by member states.

The VAT Gap

Each year, the European Commission works with the 28 EU member states to reconcile forecasts of VAT that should be collected versus actual receipts. The VAT receipt forecasts, known as VAT Total Tax Liability (VTTL), are based on national VAT rates applied to recorded sales of taxable supplies.

Reasons for the difference between VTTL and actual VAT receipts include:

  • VAT fraud
  • VAT planning to lower liabilities
  • Poor tax administrative procedures
  • VAT debtors going into liquidation

VAT Sinners & Saints

The countries with the largest VAT Gap include: Romania, Lithuania and Malta. Romania showed the biggest rise in VAT Gap in 2014, increasing by 4%.

The countries with the lowest gaps are: Sweden, Luxembourg and Finland. Greece showed the best improvement, with its Gap closing by 6%.

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.