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 was funded by the Commission as part of its work to reform the VAT system in Europe, as well as its wider campaign to clamp down on tax evasion. The study sets out detailed data on the gap between the amount of VAT due and the amount actually collected in 26 Member States between 2000-2011 with Ireland showing a VAT gap of 0.7% of GDP and the UK showing a VAT gap of 1.1% of GPD.

The VAT gap is the difference between the theoretical tax liability according to the tax law and the actual revenue collected. 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.

The Commission makes a number of recommendations in response to the report which include taking a tougher stance against evasion, and stronger enforcement at national level. The Commission also recommends a simpler system to make it easier for taxpayers to comply with the rules across Europe and calls on Member States to reform their national tax systems in a way that facilitates compliance, deters evasion and avoidance, and improves the efficiency of tax collection. The report is available on the Commission’s website.