EU – Baltic States, Financial Services, Taxation

The VAT gap, which is the difference between expected VAT revenues and VAT actually collected, has declined slightly compared with previous years, but is still remaining great, the European Commission said.

The largest gaps were registered in Romania, 35.5%, Greece, 33.6%, and Lithuania, 25.3%.  The smallest gaps were observed in Cyprus, 0.6%, Luxembourg, 0.7%, and Sweden, 1.5%. 

In 2017, Estonia's VAT gap was five %, which is 1 percentage point less than the year before. Latvia's indicator stood at 15%, two percentage points more than in 2016. Lithuania's VAT gap has been at 25% since 2015. Finland's VAT gap came down 1 perentage point on year to 7%.

In nominal terms, the largest gap was recorded in Italy, 33.6 bn euros.

Of the EU, the VAT gap as percentage of the VAT total tax liability (VTTL) decreased in 25 countries and increased in three. The biggest declines in the VAT gap occurred in Malta, by seven %age points, Poland, by 6 percentage points, and Cyprus, by four percentage points.

Based on the VAT collection figures available, the total amount of VAT lost across the EU in 2017 is estimated at 137.5 bn euros. This represents a loss of 11.2% of the total expected VAT revenue. In 2016, this indicator stood at 12.2%.

The VAT gap, which is the difference between expected VAT revenues and VAT actually collected, provides an estimate of revenue loss due to tax fraud, tax evasion and tax avoidance, but also due to bankruptcies, financial insolvencies or miscalculations.