The EU VAT gap has hit €159.5bn (£134bn) as the volume of VAT revenues lost across the EU in 2014 failed to improve significantly over 2015, according to figures released by the European Commission, highlighting continuing failures across member states to tackle VAT fraud
Research shows that the overall difference between the expected VAT revenue and the amount actually collected reached an 'unacceptably high yearly figure', according to EU officials, with a meagre 1.5% improvement on collection rates on the previous year, with member states reporting a small increase of €2.5bn in overall VAT take.
The findings support recent calls by the Commission to overhaul the EU's VAT system to tackle fraud and make it more efficient.
Member states must now follow up on the Commission's Action Plan setting out proposals to adopt a single VAT area presented last April by agreeing on a way forward towards a definitive VAT regime for cross-border trade across the EU.
More immediate measures to tackle the problem of VAT fraud have already been set in motion, but the figures just released by the Commission show that deeper reforms are needed.
The VAT gap rate ranged from a high of 38% of uncollected VAT in Romania to a low of only 1.2% in Sweden.
In the UK, the VAT gap is 10.1%, relatively unchanged since 2013, and HMRC is among the better collectors across the EU. However, it still accounts for around £13.1bn of uncollected revenue in the UK, a sizeable share of the overall £34bn tax gap at 39%.
Greece, Italy and Romania are among the worst for collection of VAT with little signs of improvement over the last three years.
Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs said: ‘Our member states are losing tens of billions of euros in uncollected VAT revenue. This is unacceptable.
‘The current regime is woefully ill-equipped to deal with the problems of VAT fraud and miscalculations, and it's clear that the numbers will not get better by themselves.
‘Member states must now quickly agree on a definitive fraud-proof EU VAT system, as laid out by the Commission earlier this year. I therefore urge all of our member states to have a frank and meaningful discussion in order to feed into next year's proposals, so we can tackle this issue once and for all.’
EU Study and Reports on the VAT Gap in the EU28 Member States: 2016 Final Report is available here