European Union: How To Close The VAT Gap

Closing VAT gap is an emerging problem not only on country level but also for the entire European Union. So what is the most effective way to do it?

VAT gap is the difference between the amount of VAT actually collected and the VAT Total Tax Liability (VTTL). In other words, it is the difference between what could be, and what is actually collected from VAT by countries.

European Union Member States from Central and Eastern Europe have had the highest VAT gap in recent years, costing the state budgets of CEE countries around €27bn annually. However, it's a problem right across the EU and states are trying to find solutions to close this gap, by implementing new provisions in their local laws.

Closing VAT gap is an emerging problem not only on country level but also for the entire European Union. Introducing measures to prevent VAT gap is listed as one of the four main areas in the next VAT Action Plan¹, which shows that in the coming years, this will be one of the priorities in EU Indirect Tax policy. Currently on an EU level, leakage from the VAT system is estimated at around €170bn, which equates to 15.2% revenue loss.

Download the latest TMF Group briefing paper, which examines the approaches by EU Member States to decrease their VAT gap, and how new law provisions may potentially impact on business.

Got questions? Contact our expert VAT team.

Footnote

1. http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/action_plan/com_2016_148_en.pdf and you can access our on-demand webinar commenting on this subject.

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