The EU VAT Gap 2024 Report presents a comprehensive analysis of value-added tax (VAT) compliance and policy discrepancies throughout the European Union. Conducted in partnership with a consortium, Oxford Economics delves into the differences between the theoretical VAT Total Tax Liability (VTTL) and the actual revenue collected. This examination sheds light on compliance inefficiencies and revenue losses prompted by policy gaps.
VAT is a significant tax levied on goods and services consumed within the EU, representing a crucial source of revenue for EU Member States. In 2023, VAT revenue accounted for 7.2% of the EU’s GDP and 15.7% of total government revenue. This underscores the importance of VAT in financing public goods and services while supporting the financial stability of governments across the region.
Key Findings from the Report
- Economic Context: The report emphasizes how events such as the COVID-19 pandemic and subsequent economic recovery have impacted VAT revenues. Additionally, inflation and the economic repercussions of the Russia-Ukraine conflict have prompted adjustments to VAT policies in various Member States.
- Compliance Gaps: In 2022, the EU’s VAT compliance gap was estimated at 7% of the VTTL, translating to approximately €89.3 billion in uncollected revenue. While this figure denotes an increase from 2021, it also reflects a decrease from pre-pandemic levels.
- E-Commerce and Digital Payments: The rise of digital transactions has positively influenced VAT compliance by minimizing opportunities for cash-based tax evasion. However, challenges persist in effectively collecting VAT on e-commerce sales.
- Sector-Specific Challenges: Industries such as services and tourism face heightened risks of VAT non-compliance due to their diverse nature, intangible offerings, and reliance on informal activities.
- Success Stories: The report not only highlights compliance gaps but also showcases successful initiatives in narrowing these gaps, particularly in Central and Eastern European nations. It also includes an analysis of the pandemic’s impact on VAT compliance.
Beyond these analytical insights, Oxford Economics collaborated with the EU Commission to visually represent the findings through an engaging infographic and a user-friendly interactive microsite, enhancing accessibility to the information.
By understanding these dynamics, policymakers and stakeholders can work towards improving VAT compliance and ultimately contribute to more robust revenue management throughout the EU.
For further details, clarification, contributions or any concerns regarding this article, please feel free to reach out to us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that all inquiries will be handled in accordance with our privacy policy
