Romania posts the highest deficit of CEE countries in VAT collecting

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Romania has the highest deficit of the countries of Central and Eastern Europe in collecting the Value Added Tax (VAT), PwC shows in a statement on Thursday.

According to the EU Commission data, the EU Member States from Central and Eastern Europe have among the highest levels of VAT Gap (the difference between the VAT revenues that the state budgets should collect and actual VAT revenues) – ranging from 22.4 percent in the Czech Republic, to 41.1 percent in Romania.

The other three CEE countries represented at the conference also have high levels of VAT Gap – Hungary (24.4 percent), Poland (26.7 percent) and Slovakia (34.9 percent).

According to PwC, in recent years, tax administration reform and modernisation programmes have been initiated by several CEE countries (e.g. Romania, Slovakia, Poland) in an attempt to reduce the VAT Gap.

This common problem throughout the region is costing the state budgets of the five CEE countries around EUR 27 billion annually.

“In today’s globalized economy, where tax evaders can easily switch countries of residence in order to take advantage of loopholes in the tax legislation, it is paramount for the CEE countries to tackle the issue of VAT fraud in a joint, coherent and coordinated manner. Thus, CEE countries should intensify their exchange of best practices and work together to successfully combat VAT fraud and reduce the VAT Gap. In addition to benefitting governments, a reduction of the VAT fraud would also benefit the business environment by diminishing hidden VAT costs and eliminating unfair tax competition”, Daniel Anghel, PwC CEE Indirect Tax Leader stated.

Officials from the ministries of finance and economy of five CEE countries (Czech Republic, Hungary, Poland, Romania and Slovakia) have called for a joint approach to combat VAT fraud and increase VAT collection in a conference hosted on Thursday by PwC in Budapest.

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