VAT gap in the EU : 2023 report : executive summary

This report examines VAT compliance and policy gaps in the EU and EU Member States. The VAT compliance gap addressed by this report is a measure of overall non-compliance in VAT. It is the difference between the tax revenue that would be collected in the case of full compliance and the actual VAT receipts. The VAT policy gap captures the effects of applying multiple rates and exemptions on the theoretical revenue that could be levied in a given VAT system. The policy gap is an indicator of the additional VAT revenue that could theoretically (i.e., under the assumption of perfect tax compliance) be generated if a uniform VAT rate is applied to the final domestic use of all goods and services by households. Below, we summarise the economic and policy context and present the main results for the VAT compliance gap. Given the substantial changes in the estimates for the last two years (covering the period of the COVID-19 pandemic), we also include case studies to discuss what is driving these massive changes in compliance. This is followed with a presentation of the results of the VAT policy gap analysis. The executive summary is complemented with background information on the scope and methodology of the study and concludes with a review of data availability and reliability.