VAT gap in the EU: 2024 report
Commissioned by European Commission
The EU VAT Gap 2024 report offers an extensive analysis of the value-added tax (VAT) compliance and policy gaps across the EU. As part of a larger consortium, Oxford Economics analysed the discrepancy between the theoretical VAT Total Tax Liability (VTTL) and actual revenue collected, providing insights into compliance inefficiencies and policy-induced revenue losses.
VAT in the European Union is a broad-based tax levied on goods and services used or consumed in the territory of the EU. It serves as one of the core revenue sources for the general government of EU Member States. In 2023, the VAT revenue-to-GDP ratio amounted to 7.2% of the EU GDP and 15.7% of total government revenue. This makes VAT essential for financing the provision of public goods and services and for ensuring the financial stability of governments.
Key results:
- Economic and Policy Context: The Covid pandemic and the subsequent recovery significantly influenced VAT revenues. Inflation and the Russian-Ukrainian war’s economic impact also shaped the VAT landscape, leading to adjustments in VAT policies across Member States.
- Compliance and Policy Gaps: The EU’s VAT compliance gap was estimated at 7% of the VTTL in 2022, equating to €89.3 billion in uncollected revenue. This marks an increase from 2021 but a decline from pre-pandemic levels.
- Impact of E-Commerce and Digital Payments: The rise in digital transactions contributed positively to VAT compliance by reducing opportunities for cash-based tax evasion, though challenges in e-commerce VAT collection remain.
- Sector-Specific Challenges: The services and tourism sectors exhibited higher risks of VAT non-compliance due to their diversity, intangibility, and informal activities.
- Case Studies: The report highlights success stories in narrowing compliance gaps, particularly in Central and Eastern European countries, and examines the pandemic’s effects on VAT compliance.
Apart from the analytical work, Oxford Economics supported the EU Commission in visualizing the results in an infographic as well as an interactive microsite.
The experts behind the research
Our Economic Consulting team are world leaders in quantitative economic analysis, working with clients around the globe and across sectors to build models, forecast markets and evaluate interventions using state-of-the art techniques. Lead consultants on this project were:
Johanna Neuhoff
Director of Economic Consulting, Economic Footprint & Sustainability
Hannah Zick
Senior Economist, Economic Footprint & Sustainability
Graeme Harrison
Head of Macro Consultancy, Macro Consulting
Lauren Braniff
Senior Economist, Macro Consulting
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