An estimated €193 billion in VAT revenues (1.5% of GDP) was lost due to non-compliance or non-collection in 2011, according to a new study on the VAT Gap in Member States. The study which was funded by the European Commission sets out detailed data on the gap between the amount of VAT due and the amount actually collected in 26 Member States between 2000 and 2011.

The United Kingdom’s average VAT Gap amounted to 12% while Ireland’s average VAT Gap was 8% over the period 2000–2011. Before the economic crisis, Ireland’s VAT gaps were mostly below the 10% level, but rose to double-digits with the onset of the recession with a peak of 15% in 2009. Ireland has the second-lowest share of VAT Liability accruing from the household sector, which was at 49% compared to the UK’s 66%. The report attributes this to possible large distortions introduced by exemptions and a multiple rate system in Ireland. Germany’s average VAT Gap amounted to 13% over the period 2000–2011 which is also the median value for the EU-26 group.

Italy, France, Germany and the United Kingdom contributed over half of the total VAT Gap in absolute terms, although in terms of their own GDP, the countries with the largest gaps are Romania, Latvia, Greece and Lithuania.