VAT Gap Report - 2021 estimate of lost EU VAT shows €38bn improvement

2 November 2023

According to the annual VAT Gap report, an estimated €61 billion in VAT revenue was lost within the European Union (EU) due to non-compliance or non-collection of VAT during the year 2021. When compared with the same study from 2020, this shows a decrease of €38 billion.

The VAT gap study is funded by the European Commission as part of its work to reform the VAT system and to clamp down on tax evasion within the EU.

Each year, the study sets out detailed data on the gap between the amount of VAT due and the amount of VAT collected in EU member states. The EU confirmed that the four main factors contributing to the VAT gap are VAT fraud and VAT evasion, VAT avoidance practices and optimisation, bankruptcies and financial insolvencies and administrative errors due to complicated VAT systems.

This latest report indicated that the total % of VAT lost now stands at 5.3% of expected revenues, down from 9.6% during 2020. It also confirmed that most EU member states have made progress in cutting their own VAT gaps, except for Denmark and Sweden, who showed a slight increase.