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EU members lost €90 billion in VAT in 2022

A report from the European Commission shows that EU member states missed out on almost €90 billion in VAT revenue in 2022.

The EU body says that the figure represents revenues lost mainly to VAT fraud, evasion, avoidance, non-fraudulent bankruptcies, miscalculations, and other factors. 

The commission’s annual VAT gap in the EU report measures the difference between theoretically expected revenue from VAT and the amount actually collected.

‘Missed opportunity’ 

This gap was €89.3 billion in 2022 – an improvement compared with the €121 billion lost in 2018, but more than €13 billion wider than the figure recorded in 2021. 

The commission says that the 2022 figure represented 7% of expected VAT revenue. 

“This is a huge amount of money, which could have been used for financing essential public good and services such as schools, hospitals, and infrastructure. This is a missed opportunity with a significant price tag,” said commissioner Wopke Hoekstra. 

Digital reporting 

Ireland was one of the countries with lowest percentage gap (1.57%), while the figure for Romania topped 30%.  

The report says that targeted policy measures have made “a significant difference”, citing the digitisation of tax systems, real-time transaction reporting, and e-invoicing. 

It adds, however, that further reforms are critical to further reducing the VAT gap. 

Last month, EU governments backed a proposal for a cross-border digital reporting system that would allow tax authorities to be informed about transactions in real time, enabling them to detect fraud more quickly.