Study to Quantify and Analyse the VAT Gap in the EU Member States

64 Pages Posted: 20 Nov 2015

See all articles by Luca Barbone

Luca Barbone

CASE - Center for Economic and Social Research; Institute for the Study of International Migration

Mikhail Bonch-Osmolovskiy

CASE - Center for Social and Economic Research

Grzegorz Poniatowski

CASE - Center for Social and Economic Research; Warsaw School of Economics (SGH)

Date Written: September 2015

Abstract

Only in 2013 the EU Member States lost approximately €168 billion in VAT revenues due to non-compliance, according to a recent study conducted by the Center for Social and Economic Research (CASE) for the European Commission. The report: “Study to Quantify and Analyse the VAT Gap in the EU Member States” examines the reasons for and reality of the VAT underperformance across twenty six Member States* .

Compared to 2012, EU26 saw €2.8 billion increase in VAT-GAP in absolute numbers. Overall, 15 Member States decreased their VAT Gaps, with the largest improvements noted in Latvia, Malta, and Slovakia. However, at the same time 11 Member States saw an increase in the VAT Gap, with the largest deteriorations in Estonia and Italy.

Emphasizing the diversity of the EU’s tax administrations, the study estimated that the VAT non-compliance in 2013 ranged from 4% in Finland, the Netherlands, and Sweden, to as much as 41% in Romania.

“The overall underperformance was due to unfavorable economic environment, as the GDP of the European Union in 2013 was nearly stagnant.” – said Grzegorz Poniatowski, one of the report’s authors – “An increase in VAT gap in 2013 can also be explained by the increasing phenomenon of ‘missing trader frauds’ and carousel frauds”.

The report also provides new and expanded evidence on the Policy Gap for the EU-26. The Policy Gap is an indicator of the additional VAT revenue that a Member State could theoretically collect if it applied standard rate to all consumption of goods and services supplied for consideration. The study shows that several Member States, including Belgium, Finland, France, Greece, Ireland, Luxembourg, Netherlands, Portugal, Spain, and the United Kingdom, could collect up to 50% more revenue if they applied a unified tax on all consumption.

Keywords: Financial sector, Europe, VAT, finance, optimal taxation

Suggested Citation

Barbone, Luca and Bonch-Osmolovskiy, Mikhail and Poniatowski, Grzegorz, Study to Quantify and Analyse the VAT Gap in the EU Member States (September 2015). CASE Network Reports No. 124. Available at SSRN: https://ssrn.com/abstract=2693524 or http://dx.doi.org/10.2139/ssrn.2693524

Luca Barbone (Contact Author)

CASE - Center for Economic and Social Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Institute for the Study of International Migration ( email )

Whitehaven Street
Washington, DC
United States

Mikhail Bonch-Osmolovskiy

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Grzegorz Poniatowski

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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