VAT gap in the EU. Report 2023

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24 Oct 2023

Fiscal Policies and Growth

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Mikhail Bonch-Osmolovsky

Adam Śmietanka

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Mikhail Bonch-Osmolovsky

Economist
Dr. Mikhail Bonch-Osmolovskiy is a Senior Economist and in-house CASE statistician and econometrician. He holds Ph.D. in Economics obtained in the Department of Economics, University of North Carolina at Chapel Hill. His research interests include construction ofsurvey-based price indices for time and regional adjustments from the raw data, imputation of household rents via hedonic regressions. … <a href="https://case.dev10.pro/publications/vat-gap-in-the-eu-report-2023-2/">Continued</a>

Articles from this author:
- VAT Gap in the EU. Report 2022
  VAT is one of the core sources of government revenue in the EU. Meeting the fiscal objective of VAT requires confronting the key challenge of taxpayer non-compliance with VAT payment obligations. It also requires sensible decisions regarding narrowing the tax base or reducing VAT liability for certain parts of the tax base. The relevance … Continued
- VAT Gap in the EU. Report 2021
  This Report has been prepared for the European Commission, DG TAXUD, for the project TAXUD/2019/AO-14, “Study and Reports on the VAT Gap in the EU-28 Member States”, and is a follow-up to the eight reports published between 2013 and 2020. The report provides yearly Value Added Tax (VAT) Gap estimates for the EU-28 covering the … Continued
- Study and Reports on the VAT Gap in the EU-28 Member States. 2020 Final Report
  This Report has been prepared for the European Commission, DG TAXUD, for the project TAXUD/2019/AO-14, “Study and Reports on the VAT Gap in the EU-28 Member States”, and is a follow-up to the seven reports published between 2013 and 2019. This Study contains Value Added Tax (VAT) Gap estimates for 2018, fast estimates using a … Continued
Author’s articles
Adam Śmietanka

Economist
Adam Śmietanka is an Economist at CASE. His areas of expertise include data analysis, data visualization, web scraping, and inflation measurement. At CASE, Mr. Śmietanka is responsible for conducting data analysis, economic research, and developing and maintaining CASE’s online monthly consumer price index. His professional experience includes an internship with PwC’s Advisory Team and a … <a href="https://case.dev10.pro/publications/vat-gap-in-the-eu-report-2023-2/">Continued</a>

Articles from this author:
- VAT compliance gap due to Missing Trader IntraCommunity (MTIC) fraud – Final report: phase 1
  The phenomenon of Missing Trader Intra-Community fraud (MTIC fraud) stands out as a significant form of VAT fraud. In this scheme, a fraudulent trader sells goods and services to other businesses, collects the VAT from customers, and then vanishes without remitting it to tax authorities. Despite variations in assessments of its exact scale, both revealed … Continued
- VAT Gap in the EU. Report 2022
  VAT is one of the core sources of government revenue in the EU. Meeting the fiscal objective of VAT requires confronting the key challenge of taxpayer non-compliance with VAT payment obligations. It also requires sensible decisions regarding narrowing the tax base or reducing VAT liability for certain parts of the tax base. The relevance … Continued
- VAT in the digital age
  The rise of the platform economy, the associated network effects, and variations across the models create challenges for the functioning of tax systems. At the same time, digital means giving tax administrations enormous opportunities. See more discussion in the report co-authored by CASE “VAT in the digital age”. This Report was prepared within the … Continued
Author’s articles

This Report has been prepared for the European Commission, DG TAXUD, for the project TAXUD/2019/AO-14, “Study and Reports on the VAT Gap in the EU-28 Member States”, and is a follow-up to the eight reports published between 2013 and 2020.

The report provides yearly Value Added Tax (VAT) Gap estimates for the EU-28 covering the 2015-2019 period. We calculate the VAT Gap as the difference between the VAT due and the actual VAT revenues. As such, it represents the VAT revenues lost compared to a theoretical VAT calculation. The underlying reasons for this VAT Gap can be grouped into four broad categories: (1) VAT fraud and VAT evasion, (2) VAT avoidance practices and optimisation, (3) bankruptcies and financial insolvencies, and (4) administrative errors.

In 2021, several EU Member States introduced temporary changes to their VAT systems. Germany reverted to its standard rate in January 2021 after temporarily reducing it in 2020 as a measure to stimulate the economy amidst the pandemic. Similarly, Ireland had a temporary reduction in VAT that lasted until February 2021, after which it reverted back to its normal rate. Sector-specific adjustments were also prevalent across various countries. Several countries implemented measures to mitigate high energy costs. Cyprus, Czechia, and Spain introduced a temporary reduction in VAT rates on electricity consumption. Other countries introduced changes to VAT rates for products and services associated with the COVID-19 pandemic

The same year, GDP increased in all 27 EU Member States, largely due to the gradual economic recovery from the COVID-19 pandemic and the measures introduced to limit its impacts. In total, the EU-27 economy grew by 5.6 percent in real terms compared to 2020. The core component of the VAT base – household consumption – increased by 6.6 percent in nominal terms in the EU-27.

The study covers the VAT compliance gap, VAT policy gap, its components, and the C-efficiency.

This report was written by a team of experts from CASE (Center for Social and Economic Research, Warsaw) directed by Grzegorz Poniatowski, and composed of Mikhail Bonch-Osmolovskiy, Adam Śmietanka, and Aleksandra Sojka. Research assistance was provided by Krzysztof Orzechowski.

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VAT gap in the EU. Report 2023

Mikhail Bonch-Osmolovsky

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Adam Śmietanka

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