Italy accounts for 29% of all missing EU VAT

In the European Commission’s latest ‘VAT Gap’ study, Italy is shown to account for 29% (€48 billion) of the estimated total missing VAT in the EU (€168 billion).

The Commission-sponsored report puts the total missing EU VAT at 15% of the anticipated revenues. In Italy, this proportion is 29%. Italy has recently introduced many measures to combat these losses, including the domestic reverse charge and VAT split payments on public expenditure.

The €168 billion VAT Gap for the 2013 numbers is a €3 billion rise on the last, 2012 figures.

The annual VAT study attempts to compare the amount of VAT that should be collected, based on national VAT rates and GDP, compared to the actual receipts recorded. This year’s study in based on the latest available figures from 2013, and covers 26 of the 28 member states.

The reasons for the difference, or gap, include:

• Effectiveness of national tax authorities at collecting revenues
• VAT fraud (see below)
• Bankruptcies of businesses owing VAT to the authorities

One of the largest single elements of the VAT Gap originates from VAT fraud. Criminal gangs have been targeting loopholes in the cross-border EU VAT regime in a number of sectors, including: computer chips; mobile phones; laptops; computer tablets; carbon offset credits; and pharmaceutical goods.

Fraudsters claim to be selling such goods across EU internal borders and therefore do not charge VAT. However, in reality, they sell the goods in country with VAT, but do not declare the VAT collected to the taxman. In a separate study this summer, the EC put such ‘missing trader fraud’ at between €43 billion and €53 billion per annum.