October 12, 2016

The European Union calls the 160 Billion VAT Gap “unacceptable”

This year a study was conducted by the EU commission providing an estimate of revenue loss to fraud among the EU countries, also called the VAT Gap – the difference between expected VAT revenues and VAT actually collected. According to the study, the countries within the European Union lost an estimated 160 billion in uncollected VAT revenue in 2014. According to the European Commission this is “unacceptable” and a plan of action will be set in place next year to tackle this issue.

The VAT gap rate ranges from country to country with Romania at the top with 37.9% uncollected VAT, and Sweden at the bottom with only 1.2%. The European Commission is determined to push to reform VAT within Europe and legislative proposals are presented for 2017 in order to tackle tax fraud and re-establish the principle of charging VAT across the boarders within the EU. The European commission will support the sharing of information among the European countries and work together with companies to address and prevent fraud. The modernized EU tax administrations will be on lookout for any EU and North American company not following the local VAT laws or charging VAT to customers on cross border trade.


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