EC: Romania lost over EUR 6.5 bln in 2018 due to non collected VAT

Romania has lost EUR 6.595 billion in 2018 from non collected VAT, according to a report on the VAT Gap released by the European Commission.

In 2018, the estimated VAT Gaps among Member States ranged from 0.7% in Sweden, to 33.8% in Romania. The smallest Gaps were observed in Sweden (0.7%), Croatia (3.5%), and Finland (3.6%) – the largest in Romania (33.8%), Greece (30.1%), and Lithuania (25.9%). Overall, half of the EU-28 recorded a Gap above 9.2%. In nominal terms, the largest Gaps were recorded in Italy (€ 35.4 billion), the United Kingdom (€ 23.5 billion), and Germany (€ 22.1 billion).

The ranking of Member States with respect to the relative size of the Gap remained relatively stable. Overall, the VAT Gap decreased in the majority of Member States, with the largest improvements noted in Hungary, Latvia, Poland, and Greece. A positive downward trend was more visible not only in the number of the countries that reduced their VAT Gap, but also in terms of the percentage of increases compared to decreases in VAT Gap (the average decrease (0.7 percentage points) is less than half of the average increase (1.6 percentage points).

The overall VAT Gap in EU Member States fell from €140.9 billion in 2017 to €140.0 billion in 2018. Because of the higher increase in revenues, in relative terms, the EU-wide gap dropped to 11.0%, down from 11.5% in 2017. In 2018, the overall VTTL for EU Member States increased by 3.6% to €1.272 billion, whereas VAT revenue increased by 4.2% to €1,132 billion. Fast estimates show that the VAT Gap will likely continue to decline in 2019 and could fall below €130 billion and 10 percent of the VTTL.

Coronavirus impact expected to be high: the VAT Gap in 2020 is forecast to increase. If the EU economy contracts by 7.4% in 2020 and the general government deficit jumps as set out in the Spring Forecast, the Gap could increase by 4.1 percentage points compared to previous year up to 13.7% and €164 billion in 2020.

This year’s VAT Gap report forecasts a pronounced increase in VAT revenue losses in the EU to €164 billion in 2020 due to the effect of the coronavirus on the European and global economy.