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VAT fraud costs the EU EUR 50 billion a year

24 September 2018, 21:49 CET
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VAT fraud costs the EU EUR 50 billion a year

Photo © Maksym Yemelyanov - Fotolia

(BRUSSELS) - EU countries lost almost EUR 150 billion in VAT revenues in 2016, of which EUR 50 bn went to the benefit of criminals, according to a new study published Friday by the European Commission.

The so-called 'VAT Gap' shows the difference between the expected VAT revenue and the amount actually collected. While the Commission says EU Member States have carried out a lot of work to improve VAT collection, the latest figures show that reform of the current EU VAT system combined with better cooperation at EU level are needed so that Member States can make full use of VAT revenues in their budgets.

Economic Affairs Commissioner Pierre Moscovici commended EU Member States for improving VAT collection throughout the EU. However, a loss of EUR 150 billion per year for national budgets remained unacceptable, he said, "especially when EUR 50 billion of this is lining the pockets of criminals, fraudsters and probably even terrorists."

He added that real improvement would only come with the adoption of the VAT reform the Commission proposed more than a year ago. He called on Member States "to move forward on the definitive VAT system before the European Parliament elections in 2019."

In nominal terms, the VAT Gap decreased by €10.5 billion to €147.1 billion in 2016, a drop to 12.3% of total VAT revenues compared to 13.2% the year before.

The individual performance of the Member States still varies significantly. The VAT Gap decreased in 22 Member States with Bulgaria, Latvia, Cyprus, and the Netherlands displaying strong performances, with a decrease in each case of more than 5 percentage points in VAT losses.

However, the VAT Gap did increase in six Member States: Romania, Finland, the UK, Ireland, Estonia, and France.

While much progress has been achieved to improve VAT collection and administration at the EU level, the Commission urges Member States to move forward and agree as soon as possible on the much broader reform to cut down on VAT fraud in the EU's system, as proposed last year by the Commission. It says the 'reboot' would improve and modernise the system for governments and businesses alike, making the system more robust and simpler to use for companies.

The VAT Gap study applies a "top-down" methodology using national accounts data to produce estimations of the VAT gaps. For the first time, the 2018 report includes a broader analysis of the effect of some external factors such as the productive structure of the economy and unemployment, as well as those under the direct control of the tax administration such as the size of the tax administration and IT expenditures.

The Commission says this aspect is particularly important since investment in IT usually leads to a VAT gap reduction.

Full report and factsheet

VAT gap - background guide

Document Actions

FRAUD

Posted by LYN WICK at 24 September 2018, 20:34 CET
EU Accounts need to be examined by UK civil service for the last 40 years ,a lot of money is not accounted for .Then the EU countries linked up to NATO should pay all they owe in back payment to records accounts .Then we need to find out from China about vat and the fraud you mention unless you can prove every euro . Shall we talk about two world wars started by Germany and how UK helped set Europe free from German dictatorship twice and the UK Bill to re-build Europe putting UK into enormous debt ,even re-building Germany -----------------now then UK was never re-paid back the cost , UK has been the second next biggest contributor to support the EU IDEOLOGY of the one country , UK has a share of EU buildings and leaving should be given from EU what UK is entitled too .Europe again shows its disregard to the democratic vote of the British people and are destroying Europe to become a fully Islamic country by taking instruction from the BILDERBURG GROUP AND UNITED NATIONS AGENDA 21/30 . OUR EYES ARE WIDE OPEN ,AND WE NO LONGER NEED FRIENDS THAT APPEAR LIKE ENEMIES ,DICTATORS ARE NO LONGER REQUIRED ,UK AND NO DEAL WITH EU SAYS THE MAJORITY ---------- WIDE WORLD OUT THERE TO TRADE .

FRAUD

Posted by Keith Bramich at 24 September 2018, 22:56 CET
Most of what you say seems to be about the past, and tearing things apart ... surely we need to concentrate on the future, and building things together? We're all stronger together, regardless of race, religion etc.

If you think that there are financial irregularities and other problems with the EU, why not try to fix them, for everyone's benefit?

From the UK point of view, there's still a big chance to reverse things, and for the UK to stay in the EU and continue to enjoy full participation in European space, scientific and other academic initiatives, and to keep London as a credible business hub.