Loss of more than 3.2 billion from VAT revenues due to tax evasion – Our country is in the 3rd worst position – Tables

An amount of 3.231 billion euros Greece lost in 2021 from VAT revenues due to tax evasion, as they show data from the Commission regarding the so-called “VAT gap” which was however limited by 21% of the potential revenue from value added tax in 2020, to 17.8% in 2021.

The report in detail (in English)

It is noted that Greece occupies the third worst position among EU countries after Romania and Malta, where VAT losses fluctuate between 25.6% and 36.7%.

Overall in the EU the VAT gap narrowed from 9.6% to 5.3% with the annual revenue loss to be 60.6 billion euros in 2021 from 99.3 billion euros in 2020.

EU countries lost around €61 billion in VAT in 2021, compared to €99 billion in 2020.

According to a new report, most EU countries made progress in the enforcement of VAT compliance in 2021 ↓ pic.twitter.com/CpPrcVfPH4

— European Commission (@EU_Commission) October 24, 2023

More specifically, most EU member states made progress in enforcing VAT compliance in 2021, according to the report published by the European Commission. The annual vat gap study, which measures the difference between theoretically expected VAT revenue and the amount actually collected, shows that member states lost around €61 billion in VAT in 2021, compared to €99 billion euros in 2020.

This figure represents revenue lost mainly to VAT fraud, tax evasion and avoidance, non-fraudulent bankruptcies, miscalculations and financial insolvencies, among other factors.

This progress in enforcing VAT compliance is positive, as lost VAT revenue can have a hugely negative impact on governments’ ability to fund the public goods and services we all depend on, such as schools, hospitals and transport.

The latest report shows that targeted policy responses have made a difference, particularly those related to the digitization of tax systems, real-time transaction reporting and e-invoicing. At the same time, temporary factors such as government support measures implemented during the COVID-19 pandemic, which were often dependent on the payment of taxes, may also have played a role in driving this positive change.
Main results in 2021

In nominal terms, the overall EU VAT gap has been reduced by around €38 billion, from €99 billion in 2020 to €61 billion in 2021, an unprecedented improvement over previous years. Some Member States, such as Italy (-10.7 percentage points) and Poland (-7.8 percentage points) recorded particularly notable reductions in their national VAT Gap figures.

Looking at Member State-level estimates, in 2021 the variation and scale of changes in the VAT compliance gap year-on-year were much larger compared to previous years – changes ranged from -10.7 p.m. to 0.7 am In most (16) Member States, the year-on-year change in the VAT compliance gap exceeded 3 pp. In a typical year in the last decade the number of countries with such a significant change in the VAT compliance gap did not exceed eight.

Overall, the VAT gap increased in only two EU-27 Member States – Denmark (by 0.7 pp) and Sweden (by 0.2 pp).

The largest reductions in the VAT gap were observed in Italy (-10.7 p.m.), Cyprus (-9.2 p.m.), Poland (-7.8 p.m.), Belgium (- 6.7 am) and in Ireland (-6.0 am). Such large reductions in the VAT gap in times of economic downturn may seem counterintuitive – difficult economic conditions should theoretically reduce business liquidity, which would result in the inability to meet certain obligations, including VAT obligations. Positive changes in compliance may have been caused by the support measures dependent on the payment of taxes and the reduction in the incidence of bankruptcies. Another reason for the observed fall in the VAT compliance gap may be related to changes in the structure of household consumption in categories and channels where compliance is generally higher (e.g. online shopping) and the increased share of cashless payments .

Estimates of the VAT gap for most Member States ranged from 0 to 10 percent of VTTL. The smallest compliance gap was observed in the Netherlands (-0.2%), Finland (0.4%), Spain (0.8%) and Estonia (1.4%).

Negative estimates are clearly not possible, but in Member States where there is already very low non-compliance, they may arise due to statistical and measurement errors (see further discussion in Section VII.c). On the opposite side of the ranking are Romania (36.7%), Malta (25.7%), Greece (17.8%) and Lithuania (14.5%). In nominal terms, the largest gaps were estimated in Italy (€14.6 billion), France (€9.5 billion) and Romania (€9.0 billion). The median VAT compliance was 4.9 percent of VTTL, which is now closer to the average, showing convergence of Member States with higher VAT compliance gaps.

Apart from some specific effects caused by the COVID-19 pandemic, the unprecedented increase in VAT collection and the reduction of the overall VAT gap in most Member States could be explained by several factors. First, online payments and online purchases, where the VAT compliance rate is generally much higher, have increased in popularity since the COVID-19 pandemic. Second, Member States are reaping the benefits of targeted measures implemented in their domestic tax systems, such as new digital reporting tools, real-time transaction monitoring and e-invoicing systems that are particularly effective against criminal VAT fraud.

As part of the 2022 VAT in the Digital Age proposals, which are currently being discussed between Member States in the Council, the Commission has mainly proposed plans to move to a cross-border digital reporting system based on e-invoicing for business-to-business transactions. The new system will ensure that Member States’ authorities are fully informed of transactions in near real time, allowing them to immediately deal with VAT fraud, in particular missing trader fraud or carousel fraud.