Study and Reports On The Vat Gap 2017 PDF

Study and Reports on the VAT Gap in the EU-28 Member States:
2017 Final Report
TAXUD/2015/CC/131
Client: Directorate General Taxation and Customs Union
CASE – Center for Social and Economic Research (Project leader)
Institute for Advanced Studies (Consortium leader)
In consortium with
CPB IFS
DIW IPP
DONDENA PWC
ETLA ISER
IEB
Warsaw, 18 September 2017

VAT Gap in the EU-28 Member States
Acknowledgements
This report was written by a team of experts from CASE (Center for Social and Economic
Research, Warsaw), directed by Grzegorz Poniatowski, and composed of Mikhail Bonch-
Osmolovskiy and Misha Belkindas. Research assistance was provided by Adam Śmietanka. The
Project was coordinated by Marta Smagowicz.
We also acknowledge discussions with several officials of tax and statistical offices of the
Member States, who offered valuable comments and suggestions. All responsibility for the
estimates and the interpretation in this report remains with the authors.
IHS, Institute for Advanced Studies

Josefstädter Straße 39
1060 Vienna
Austria
Telephone: +43 599 91-0
Telefax: +43 599 91 555
Internet: www.ihs.ac.at
FWC No. TAXUD/2015/CC/131
page 2 of 72
Contents
List of Acronyms and Abbreviations ................................................................................................. 7

Executive Summary .......................................................................................................................... 8
Introduction ...................................................................................................................................... 9
I. Background: Economic and Policy Context in 2015 ............................................................... 10
a. Economic Conditions in the EU during 2015 ...................................................................... 10
b. VAT Regime Changes .......................................................................................................... 11
c. Sources of Change in VAT Revenue Components .............................................................. 13
II. The VAT Gap in 2015 .............................................................................................................. 16
III. Individual Country Results .................................................................................................. 20
IV. Policy Gap Measures .......................................................................................................... 52
Annex A. Methodological Considerations ...................................................................................... 55
a. New rule for place of supply of electronic services and its application to the VAT Gap ... 55
b. Source of revisions of VAT Gap estimates .......................................................................... 56
c. Country specific issues ....................................................................................................... 57
d. Decomposition of VAT Revenue ......................................................................................... 58
e. Data Sources and Estimation Method ................................................................................ 58
f. Derivation of the Policy Gap ............................................................................................... 61
Annex B. Statistical Appendix ......................................................................................................... 65
References ...................................................................................................................................... 72
page 3 of 72
List of Figures
Figure 1.1. Change in VAT Revenue Components (2015 over 2014) ............................................. 16
Figure 2.1. VAT Gap as a percent of the VTTL in EU-27 Member States, 2015 and 2014 ............. 17
Figure 2.2. Percentage Point Change in VAT Gap (2015 over 2014).............................................. 17
Figure 2.3. VAT Gap in EU Member States, 2011-2015 ................................................................. 18
Figure A1. Components of Ideal Revenue, VTTL, and VAT Collection ........................................... 64
page 4 of 72
List of Tables
Table 1.1. Real and Nominal Growth in the EU-28 in 2015 ............................................................ 11
Table 1.2. VAT Rate Structure as of 31 December 2014, and Changes during 2015 ..................... 13
Table 1.3. Change in VAT Revenue Components (2015 over 2014) ............................................... 15
Table 3.1. Belgium: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 21
Table 3.2. Bulgaria: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (BGN
million)............................................................................................................................................ 22
Table 3.3. Czech Republic: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015
(CZK million) ................................................................................................................................... 23
Table 3.4. Denmark: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (DKK
million)............................................................................................................................................ 24
Table 3.5. Germany: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 25
Table 3.6. Estonia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 26
Table 3.7. Ireland: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 27
Table 3.8. Greece: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 28
Table 3.9a. Spain: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 29
Table 3.9b. Spain: Alternative Estimates ........................................................................................ 30
Table 3.10. France: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 31
Table 3.11. Croatia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2014-2015 (HRK
million)............................................................................................................................................ 32
Table 3.12a. Italy: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 33
Table 3.12b. Italy: Alternative Estimates........................................................................................ 34
Table 3.13. Cyprus: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2015 (EUR million)
........................................................................................................................................................ 35
Table 3.14. Latvia: VAT Revenue VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 36
Table 3.15. Lithuania: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (LTL
million)............................................................................................................................................ 37
Table 3.16. Luxembourg: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015
(EUR million) ................................................................................................................................... 38
Table 3.17. Hungary: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (HUF
million)............................................................................................................................................ 39
Table 3.18. Malta: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million)............................................................................................................................................ 40
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Table 3.19a. Netherlands: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015
(EUR million) .................................................................................................................................. 41
Table 3.19b. Netherlands: Alternative Estimates .......................................................................... 42
Table 3.20. Austria: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million) ........................................................................................................................................... 43
Table 3.21. Poland: VAT Revenue VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (PLN
million) ........................................................................................................................................... 44
Table 3.22. Portugal: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million) ........................................................................................................................................... 45
Table 3.23. Romania: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (RON
million) ........................................................................................................................................... 46
Table 3.24. Slovenia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million) ........................................................................................................................................... 47
Table 3.25. Slovakia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million) ........................................................................................................................................... 48
Table 3.26. Finland: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR
million) ........................................................................................................................................... 49
Table 3.27. Sweden: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (SEK
million) ........................................................................................................................................... 50
Table 3.28. United Kingdom: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015
(GBP million) .................................................................................................................................. 51
Table 4.1. Policy Gap, Rate Gap, Exemption Gap, and Actionable Gaps ....................................... 54
Table A.1. Source of revisions of VAT Gap estimates .................................................................... 57
Table A.2. Data Sources ................................................................................................................. 60
Table B1. VTTL (EUR million) .......................................................................................................... 65
Table B2. Household VAT Liability (EUR million) ........................................................................... 66
Table B3. Intermediate Consumption and Government VAT Liability (EUR million) ..................... 67
Table B4. GFCF VAT Liability (EUR million)..................................................................................... 68
Table B5. VAT Revenues (EUR million)........................................................................................... 69
Table B6. VAT Gap (EUR million) .................................................................................................... 70
Table B7. VAT Gap (percent of VTTL) ............................................................................................. 71
page 6 of 72
List of Acronyms and Abbreviations
CASE Center for Social and Economic Research (Warsaw)

CEE Central and Eastern Europe
COICOP Classification of Individual Consumption according to Purpose
CPA Statistical Classification of Products by Activity in accordance with Regulation (EC)
No 451/2008 of the European Parliament and of the Council of 23 April 2008
establishing a new statistical classification of products by activity)
EC European Commission
ESA95 European System of Accounts 1995 in accordance with Council Regulation (EC) No
2223/96 of 25 June 1996 on the European system of national and regional
accounts in the Community
ESA10 European System of Accounts 2010 in accordance with Regulation (EU) No
549/2013 of the European Parliament and of the Council of 21 May 2013 on the
European system of national and regional accounts in the European Union
EU European Union
EU-27 Current Member States of the European Union except Cyprus
EU-28 Current Member States of the European Union
GDP Gross Domestic Product
GFCF Gross Fixed Capital Formation
IC Intermediate Consumption
MOSS Mini One Stop Shop
MTIC Missing Trader Intra Community
NAC National Currency
NPISH Non-Profit Institutions Serving Households
OECD Organisation for Economic Cooperation and Development
ORS Own Resource Submissions
o/w of which
QRM Quick Reaction Mechanism
SUT Supply and Use Tables
TAXUD Taxation and Customs Union Directorate-General of the European Commission
UK United Kingdom
VAT Value Added Tax
VTTL VAT Total Tax Liability
VR VAT Revenue
page 7 of 72
Executive Summary
This analysis serves as the Final Report for the DG TAXUD Project 2015/CC/131, “Study and
Reports on the VAT Gap in the EU-28 Member States”, which is a follow up to the reports
published in 2013, 2014, 2015, and 2016.
We present new estimates of the VAT Gap and the Policy Gap for the year 2015, as well as updated
estimates for the years 2011-2014. This report provides first estimates of the VAT Gap for Cyprus,
using the newly revised national accounts data from the Cyprus Statistical Agency.
The VAT Gap is the difference between the amount of VAT revenue actually collected and the
theoretical amount that is expected to be collected, given the observed information on the
country’s economy and the actual VAT legislation. The amount of VAT total theoretical liability,
known as VTTL, is calculated using the so-called “top-down” approach: the national VAT rate
structure is imposed on the national accounts expenditure and investment data at the most
detailed level possible to derive expected liability.
VAT Gap cannot be treated as a straightforward equivalent of VAT fraud. Apart from VAT fraud
and tax evasion and avoidance, the VAT Gap can be influenced by bankruptcies and tax arrears,
as well as reporting problems in national accounts.
An important change in the VAT rules in 2015 came with the introduction of the MOSS regime,
which changed the way VAT was invoiced for exported electronic services. VAT structure remained
unchanged in most countries, with only three Member States changing the level and scope of VAT
rates.
Nominal VAT revenues increased on average by 4.5 percent in the EU-27—a combination of
revived economic growth (2.9 percent) and an increase in VAT compliance (2.4 percent).1
In nominal terms, in 2015, the VAT Gap in the EU-28 Member States amounted to EUR 151.5
billion. The VTTL accounted for EUR 1,187.8 billion, whereas VAT revenue was EUR 1,035.3 billion.
Expressed as a percent of VTTL, the VAT Gap share dropped to 12.8 percent, down from 14.1
percent in 2014. In absolute values, the VAT Gap dropped by EUR 8.7 billion and is at its lowest
level since 2011. The share of the VAT Gap in the VTTL decreased in 20 Member States, and
increased only in 7 out of the total 27 Member States (EU-28 excluding Cyprus:
The smallest Gaps were observed in Sweden (-1.42 percent)2, Spain (3.52 percent), and Croatia
(3.92 percent). The largest Gaps were registered in Romania (37.18 percent), Slovakia (29.39
percent), and Greece (28.27 percent). Overall, half of the EU-27 Member States recorded a Gap
below 10.8 percent.
1
Figures are not additive.
2
Possible reasons for negative VAT Gap are use of cash vs accrual revenues, underestimation of GFCF
liabilities, or incompleteness of national accounts.
page 8 of 72
Introduction
This Report presents the fifth follow-up of the “Study to quantify the VAT Gap in the EU Member
States”, which was conducted by Barbone et al. in 2013, 2014, 2015, and 2016. 3 This update
contains new VAT Gap estimates for 2015, as well as updated estimates for 2011-2014. It also
includes the first ever VAT Gap estimates for Cyprus.4
The VAT Gap is essentially the difference between expected and actual VAT revenues. One of the
primary interests in the VAT Gap lies in its connection to VAT fraud, an important political and
economic issue across Member States and for the EC. Numerous measures to tackle different
forms of VAT tax evasion are discussed, debated, and implemented by EU Member States and the
EC, such as the extension of the reverse charge mechanism, the recapitulative statement of intra-
EU supplies, and the quick VAT fraud reaction mechanism (QRM), among others.
However, the VAT Gap estimates presented in this report should not be directly interpreted as
VAT fraud estimates.5 Other factors such as bankruptcies, tax arrears, and reporting problems in
national accounts can contribute positively to the VAT Gap. Therefore, the VAT Gap should be
more cautiously treated as an upper bound estimate of VAT non-compliance, as well as a general
index of the VAT system efficiency and tax administrations capacity to collect VAT.
The structure of this report resembles that of the previous publications. Chapter I of the report
presents the main economic and policy factors that affected Member States during the course of
2015. It also includes a decomposition of the change in VAT revenues into base, effective rate, and
tax compliance components. The overall results are presented and briefly described in Chapter II.
Chapter III provides detailed results and outlines trends for individual countries coupled with
analytical insights. In Chapter IV, we examine the Policy Gap and the contribution that VAT
reduced rates and exemptions have made to this Gap. Annex A contains methodological
considerations on the VAT Gap and the Policy Gap. Annex B provides statistical data and a set of
comparative tables.
3
The first study of the VAT Gap in the EU was conducted by Reckon (2009); however, due to differences in
methodology, it cannot be directly compared to these latter studies.
4
Cyprus VAT Gap estimates were omitted in the previous publications due to the absence of national
accounts data.
5
VAT evasion – generally comprises illegal arrangements where tax liability is hidden or ignored, i.e. the
taxpayer pays less tax than he/she is supposed to pay under the law by hiding income or information from
the tax authorities; VAT fraud - is a form of deliberate evasion of tax which is generally punishable under
criminal law. The term includes situations in which deliberately false statements are submitted or fake
documents are produced; VAT avoidance – acting within the law, sometimes at the edge of legality, to
minimise or eliminate tax that would otherwise be legally owed. It often involves exploiting the strict letter
of the law, loopholes and mismatches to obtain a tax advantage that was not originally intended by the VAT
legislation.
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I. Background: Economic and Policy Context in 2015
a. Economic Conditions in the EU during 2015
2015 marked the third year of recovery since the economic crisis of 2011. Combined real GDP
growth in the EU was 2.2 percent in 2015, up from 1.7 percent in 2014 and 0.2 percent in 2013.
At the same time, nominal final consumption increased by approximately 4 percent and nominal
GFCF by roughly 6 percent (see Table 1.1).
The highest growth rate of 26 percent in Ireland stands out as an accounting artefact, which
occurred when several multinational companies moved their headquarters to Ireland and
appeared on the investment balance sheet. The nominal final consumption expenditure in Ireland
increased at a much moderate rate of 4 percent. For the remaining Member States, excluding
Greece, real GDP growth rates were positive and ranged from 0 percent (Finland) to 7.3 percent
(Malta).
The only country to experience a downturn in 2015 was Greece, with negative growth in final
consumption as well as investment and intermediate consumption.
Table 1.1 also illustrates a well-known general fact about the nature of investment: changes in
investment are much more variable than changes in consumption, both across countries and
across time. In this example, it would hold true even if we compare variations without taking
extreme GFCF growth rates into account (i.e. as in Ireland and Malta). If we were to examine the
variation of GFCF over time for a particular sector: investment by government, households, or
financial enterprises, among others, the picture would look even more complicated. It is mainly
because of this feature that it is necessary to revise VAT Gap estimates whenever new information
on actual investment figures becomes available.
page 10 of 72
Table 1.1. Real and Nominal Growth in the EU-28 in 2015
Nominal Growth (%)

Real GDP
Member State Final Intermediate
Growth (%) GDP GFCF
Consumption Consumption
Belgium 1.5 2.4 1.2 2.9 0.9

Bulgaria 3.6 5.9 4.8 5.4 3.2
Consumption
Czech Republic 5.3 6.5 3.8 12.2 3.5
Denmark 1.6 2.5 2.2 2.9 0.8
Germany 1.7 3.7 3.0 3.2 0.3
Estonia 1.4 2.5 5.5 -0.5 -1.4
Ireland 26.3 32.4 4.5 37.0 58.4
Greece -0.2 -1.3 -1.9 -1.6 -5.4
Spain 3.2 3.7 2.8 6.9 4.9
France 1.1 2.2 1.5 0.9 0.6
Croatia 2.2 2.3 0.1 4.1 1.7
Italy 0.8 1.5 1.0 1.8 -0.1
Cyprus 1.7 0.4 -0.1 14.1 0.7
Latvia 2.7 3.1 3.5 -1.8 1.8
Lithuania 1.8 2.0 3.8 6.3 -6.1
Luxembourg 4.0 4.7 3.0 0.6 15.0
Hungary 3.1 4.9 3.7 4.3 4.9
Malta 7.3 9.8 6.3 58.2 7.4
Netherlands 2.3 3.1 1.4 10.8 0.2
Austria 1.0 2.9 2.0 2.3 -0.1
Poland 3.8 4.6 2.3 6.5 3.2
Portugal 1.6 3.7 2.8 5.5 0.7
Romania 3.9 6.4 6.3 8.4 2.3
Slovenia 2.3 3.3 0.6 2.9 2.0
Slovakia 3.8 3.6 3.1 16.9 5.4
Finland 0.0 2.0 1.6 1.1 -2.3
Sweden 4.1 6.2 4.3 9.0 n/a
United Kingdom 2.2 2.8 2.3 4.8 n/a
EU-28 2.2 5.1 4.1 6.0 n/a
Source: Eurostat.
b. VAT Regime Changes
One of the most important changes in 2015 was the EU-wide change in regulation regarding “place
of supply” of electronic services.6 Before 2015, VAT charged on electronic services was invoiced
to the country where the provider of services is registered, like for any other good. Since 2015,
however, the VAT is to be paid to the country of customer residence. A voluntary MOSS system
6
Council Directive 2008/8/EC – place of supply of services and subsequent regulations (Council
Implementing Regulation (EU) No 1042/2013 – place of supply of services; Council Implementing Regulation
(EU) No 967/2012 – obligations under the one-time registration scheme (MOSS); Commission Implementing
Regulation (EU) No 815/2012 - standardised information for registrations and returns).
page 11 of 72
was set up in each EU country to facilitate VAT accounting. During the transitional period, the
countries could retain 30 percent of the VAT revenues generated under the old regime. This
change had a profound effect on the countries with a large export of electronic services, such as
Luxembourg and Malta. The methodological issues regarding the introduction of the MOSS system
concerning VAT Gap estimations are discussed in Section a of Annex A.
Luxembourg was one of the three Member States that implemented changes to the VAT rates
structure, partly to counteract the loss of revenue due to MOSS. Except for the super reduced
rate, all other rates in Luxembourg were raised by two percentage points.
In Greece, the government raised the rates in July 2015 as part of the bailout agreement with the
EU. In particular, rates were raised for several of the food products and for hotels and
accommodation services. Additionally, Greece’s mainland rate was established on several of the
islands, where a 30 percent lower rate had been in use before.
The Czech Republic has introduced a lower 10 percent reduced rate for special items, such as
pharmaceuticals, vaccines, and baby food (see Table 1.2).
Another noticeable change in VAT rules in 2015 was the expansion of the reverse charge
mechanism across several countries (the process began in 2013-2014). In particular, the
application of the reverse charge was extended in the Czech Republic, Italy, Hungary, Poland, and
Slovenia. Importantly, the introduction of the reverse charge can have a negative temporary effect
on VAT revenues due to delays in tax collection.
Across the EU, the standard VAT rate varied from 17 percent in Luxembourg to 27 percent in
Hungary. The median standard rate remained at 21 percent. However, the median effective VAT
rate was equal to 12.5 percent.
page 12 of 72
Table 1.2. VAT Rate Structure as of 31 December 2014, and Changes during 2015
Standard Reduced Super Parking Changes Weighted

Member State Rate(s) Reduced Average
Rate (SR) Rate during 2015
(RR) Rate Rate7
Belgium 21 6 / 12 - 12 - 10.0
Bulgaria 20 9 - - - 14.5
Czech Republic 21 10/15 - new RR 10 12.7
Denmark 25 - - - - 14.7
Germany 19 7 - - - 10.6
Estonia 20 9 - - - 12.8
Ireland 23 9 / 13.5 4.8 13.5 - 11.2
Greece 23 6 / 13 - - RR 6.5 to 6 10.8
Spain 21 10 4 - - 8.5
France 19.6 5.5 / 10 2.1 - 9.6
Croatia 25 5/13 - - 16.0
Italy 22 10 4 - - 10.2
Cyprus 19 5/9 - - 10.4
Latvia 21 12 - - - 12.2
Lithuania 21 5/9 - - - 14.2
SR 15 to 17,
Luxembourg 17 8 3 14 RR 6 to 8, 12.9
PR 12 to 14
Hungary 27 5 / 18 - - - 15.8
Malta 18 5/7 - - - 12.3
Netherlands 21 6 - - - 10.1
Austria 20 10 - 12 - 11.2
Poland 23 5/8 - - - 11.9
Portugal 23 6 / 13 - 13 - 11.5
Romania 24 5/9 - - - 18.0
Slovenia 22 9.5 - - - 11.9
Slovakia 20 10 - - - 12.6
Finland 24 10 / 14 - - - 12.2
Sweden 25 6 / 12 - - - 13.0
United Kingdom 20 5 - - - 9.4
Source: TAXUD, VAT Rates Applied in the Member States of the European Union: Situation of 1st
January 2016.
c. Sources of Change in VAT Revenue Components
The value of actual VAT revenue can be expressed as the product of three components:
Actual Revenue = Net Base * Effective Rate * Compliance Gap, where Effective Rate is the ratio of
theoretical VTTL to the Net Base. The Net Base (which is the sum of final consumption and
investment by households, NPISH, and government), in turn, is calculated as the difference
between Gross Base, which includes VAT, and VAT revenues actually collected.
7
Ratio of VTTL and tax base. See methodological considerations in Section d in Annex A.
page 13 of 72
Table 1.3 presents the decomposition of the total changes in nominal VAT revenues into these
three components: change in net taxable base, change in the effective rate applied to the base,
and change in the compliance gap (Table 1.3 does not include Cyprus, for which the figures for
2014 are not available).
The highest contributing factor to the increase in revenues was growth in nominal net base: across
the EU, this was about 2.9 percent. In two Member States, Greece and Croatia, the base shrank
by 2.4 and 1.2 percent, respectively.
Malta and Luxembourg experienced the biggest negative change in effective rate, an effect
generated by the loss of VTTL due to the MOSS regime introduction. The biggest positive increase
in the effective rate—by 8.5 percent—was in Greece, which had made changes in its VAT rate
structure. The 6.5 percent increase in the effective rate in Croatia, despite any changes to the VAT
legislation, is explained in greater detail in the footnote.8
Excluding Malta and Luxembourg, the EU average increase in the effective rate was just 0.6
percent.
Finally, increase in VAT compliance was the second major contributor to the growth in revenues,
in total 1.5 percent in the EU-27.
8
The increase in the effective rate in Croatia occurred as a result of the combination of a stagnant gross
base, a stagnant VTTL, and a simultaneous increase in nominal revenues. Subsequently, the net base,
calculated as the difference between the gross base and the VAT revenues, has contracted, and the effective
rate has increased.
page 14 of 72
Table 1.3. Change in VAT Revenue Components (2015 over 2014)
Change in
Change in VAT Change in Base Change in
Member State Effective Rate
Compliance (%) (%) Revenue (%)
(%)
Belgium -0.1 -1.1 1.3 0.1

Bulgaria -1.1 3.9 3.7 6.6
Czech Republic 0.2 0.2 5.3 5.7
Denmark 0.6 -0.4 1.9 2.1
Germany -0.3 1.5 2.9 4.2
Estonia -0.6 4.2 5.6 9.4
Ireland 0.2 -1.3 5.0 3.8
Greece 8.5 -4.0 -2.4 1.6
Spain -0.3 5.2 2.7 7.8
France -0.3 1.4 1.0 2.1
Croatia 6.5 0.4 -1.2 5.7
Italy -0.3 3.5 0.8 4.1
Latvia 0.9 1.3 2.7 5.0
Lithuania -1.2 1.6 4.0 4.5
Luxembourg -9.5 -3.3 5.0 -8.0
Hungary 0.8 4.0 4.8 9.8
Malta -23.4 28.2 8.5 6.5
Netherlands 2.1 1.4 1.5 5.1
Austria 0.0 1.5 1.8 3.3
Poland 0.0 0.5 2.1 2.6
Portugal -0.1 2.0 2.8 4.7
Romania -2.8 9.9 5.4 12.6
Slovenia -0.4 2.1 0.3 2.0
Slovakia 0.1 1.6 6.1 7.9
Finland 0.0 -1.0 1.1 0.1
Sweden 1.2 1.7 4.1 7.2
United Kingdom 2.1 -0.3 2.2 4.0
EU-27 (total) 2.1 1.5 4.0 7.9
Source: own calculations.
page 15 of 72
Figure 1.1. Change in VAT Revenue Components (2015 over 2014)
40%
30%
20%
10%
0%
-10% BE BG CZ DK DE EE IE EL ES FR HR IT LV LT LU HU MT NL AT PL PT RO SI SK FI SE UK
-20%
-30%
change in effective rate change in VAT compliance change in base
II. The VAT Gap in 2015
The VAT Gap measured in this study was estimated using essentially the same methodology as in
the previously cited VAT Gap studies. The VAT Gap is defined as the difference between the VAT
total tax liability (VTTL, sometimes also known as VAT total theoretical liability) and the amount
of VAT actually collected. We compute VTTL in a “top-down” approach by deriving the expected
VAT liability from the observed national accounts data, such as supply and use tables (SUT). In
particular, VAT liability is estimated for final household, government, and NPISH expenditures;
non-deductible VAT from intermediate consumption of exempt industries; and VAT from GFCF of
exempt sectors. We also account for country-specific tax regulations, such as exemptions for small
business under the VAT thresholds (if applicable); non-deductible business expenditures on food,
drinks, and accommodation; and restrictions to deduct VAT on leased cars, among others. The
precise formula is given in Section d in Annex A.
The availability and quality of SUT data varies greatly country by country and year by year. In the
course of our computations, some expenditure and investment figures, which are not available
for the latest years, are estimated using industry- and sector-specific growth rates and taxable
shares. 9 This requires the frequent revision of previous estimates whenever actual national
accounts data is published or new information on the taxable investment becomes available.
In nominal terms, in 2015, the VAT Gap in the EU-28 Member States amounted to EUR 151.5
billion. The VTTL accounted for EUR 1,187.8 billion, whereas VAT revenue was EUR 1,035.3 billion.
In relative terms, the VAT Gap share dropped to 12.8 percent down from 14.1 percent in 2014,
and is at its lowest value since 2011. In absolute values, the nominal VAT Gap has dropped by EUR
8.7 billion and is at its lowest value since then. Of the EU-27 (excluding Cyprus), the VAT Gap share
decreased in 20 countries and increased in only 7—namely, Belgium, Denmark, Ireland, Greece,
Luxembourg, Finland, and the UK (see Figure 2.2).
9
The SUT are estimated using the RAS method, an iterative scaling procedure whereby a matrix is adjusted
until its column sums and row sums equal to pre-specified totals. The GFCF VAT liability is estimated based
on national accounts investment data in the specific sector combined with the shares of investment taxed
at different rates, which, in turn, are derived from ORS.
page 16 of 72
The smallest Gaps were observed in Sweden (-1.42 percent), Spain (3.52 percent), and Croatia
(3.92 percent). The largest Gaps were registered in Romania (37.18 percent), Slovakia (29.39
percent), and Greece (28.27 percent). Overall, half of the EU-27 Member States recorded a Gap
below 10.8 percent (see Figure 2.1).
The biggest decline in the VAT Gap share occurred in Malta, as the result of a 17 percent decline
in VTTL due to the effect that the introduction of the MOSS regime had on the e-gambling industry.
The second biggest decline in VAT Gap (5.7 percentage points) occurred in Romania.
Figure 2.1. VAT Gap as a percent of the VTTL in EU-27 Member States, 2015 and 2014
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
SE HR ES EE SI LU FI NL AT DE IE BE DK UK PT FR HU CZ LV BG MT PL IT LT EL SK RO
-5%
2015 2014 median
Figure 2.2. Percentage Point Change in VAT Gap (2015 over 2014)
5
3 3
1 1 1
0 0
0
MTRO ES EE HU BG IT SI PT SE AT DE NL FR LT SK LV HR
0 PL 0 UK DK FI BE IE EL LU
0 CZ
-1 -1 -1 -1 -1 -1 -1
-2 -2 -2
-3
-3 -3
-5 -4
-5
-6
-10
-15
-17
-20
page 17 of 72
Figure 2.3. VAT Gap in EU Member States, 2011-2015
page 18 of 72
Table 2.1. VAT Gap Estimates, 2014-2015 (EUR million)
2014 2015 VAT

Gap
MS Revenues VTTL VAT Gap VAT Revenues VTTL VAT Gap VAT
Change
Gap (%) Gap (%)
(pp)
BE 27518 30496 2978 9.77 27547 30869 3323 10.76 0.99
BG 3810 4986 1176 23.59 4059 5111 1052 20.58 -3.01
CZ 11602 13916 2313 16.62 12382 14826 2444 16.48 -0.14
DK 24950 27868 2919 10.47 25470 28562 3092 10.83 0.36
DE 203081 227979 24898 10.92 211616 233982 22366 9.56 -1.36
EE 1711 1874 163 8.70 1873 1969 96 4.88 -3.82
IE 11521 12628 1106 8.76 11955 13275 1319 9.94 1.18
EL 12676 16966 4290 25.29 12885 17964 5079 28.27 2.98
ES 63643 69400 5757 8.30 68589 71092 2503 3.52 -4.78
FR 148454 170435 21981 12.90 151622 171735 20113 11.71 -1.19
HR 5368 5611 243 4.33 5689 5921 232 3.92 -0.41
IT 97071 135376 38305 28.30 101034 136127 35093 25.78 -2.52
CY 1517 1639 122 7.44 7.44
LV 1787 2207 420 19.03 1876 2287 411 17.97 -1.06
LT 2764 3816 1052 27.57 2888 3925 1037 26.42 -1.15
LU 3732 3823 90 2.35 3432 3634 202 5.56 3.21
HU 9754 11757 2003 17.04 10669 12369 1700 13.74 -3.30
MT 642 1063 421 39.60 684 883 199 22.54 -17.06
NL 42708 47050 4342 9.23 44879 48751 3872 7.94 -1.29
AT 25386 28084 2699 9.61 26232 28589 2357 8.24 -1.37
PL 29317 39032 9715 24.89 30075 39840 9765 24.51 -0.38
PT 14682 16914 2232 13.20 15368 17357 1989 11.46 -1.74
RO 11496 20116 8620 42.85 12939 20599 7659 37.18 -5.67
SI 3155 3411 256 7.51 3219 3406 188 5.52 -1.99
SK 5021 7227 2206 30.52 5420 7677 2256 29.39 -1.13
FI 18948 20159 1211 6.01 18974 20392 1418 6.95 0.94
SE 38846 38956 110 0.28 40501 39933 -568 -1.42 -1.70
UK 157478 176193 18715 10.62 181945 204156 22210 10.88 0.26
Total 977121 1137342 160220 14.09 1033822 1185230 151408 12.77 -1.31
EU-2710
Total 1035339 1186869 151530 12.77
EU-28
Median 10.92 10.85
10
EU-28 without Cyprus.
page 19 of 72
III. Individual Country Results
This Chapter reviews the individual results for each EU-27 Member State, highlighting statistical
trends and the most important changes in the particular VAT systems. The results are presented
in the following order:
Country Page
Belgium 21
Bulgaria 22
Czech Republic 23
Denmark 24
Germany 25
Estonia 26
Ireland 27
Greece 28
Spain 29
France 31
Croatia 32
Italy 33
Cyprus 35
Latvia 36
Lithuania 37
Luxembourg 38
Hungary 39
Malta 40
Netherlands 41
Austria 43
Poland 44
Portugal 45
Romania 46
Slovenia 47
Slovakia 48
Finland 49
Sweden 50
United Kingdom 51
page 20 of 72
Table 3.1. Belgium: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
35000 20%
Belgium 2011 2012 2013 2014 2015 30000
14%
25000 12% 12% 15%
VTTL 29604 31229 31057 30496 30869 20000 10%
11%
10%
o/w liability on 15000
household final 16666 17219 17576 17480 17870 10000 5%

5000
consumption
0 0%
o/w liability on 2011 2012 2013 2014 2015
government and NPISH 1452 1482 1419 1441 1469 GAP % VTTL Revenues
final consumption
o/w liability on Highlights

intermediate 5983 6117 6278 5924 6069
 In the second half of 2015, the reduced rate on electricity for household
consumption
consumption (implemented in 2014) was eliminated. The VTTL
o/w liability on GFCF 4007 4895 4725 4992 5088 rebounded up 1 percent from a decline in 2014. However, VAT revenues
remained stagnant, which led to a slight increase in the VAT Gap by 1
o/w net adjustments 1496 1516 1059 660 373
percentage point.
VAT revenue 25979 26844 27250 27518 27547
VAT GAP 3625 4385 3807 2978 3323
VAT GAP as a percent

12% 14% 12% 10% 11%
of VTTL
VAT GAP change since

- 1 pp
2011
page 21 of 72
Table 3.2. Bulgaria: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (BGN million)
Bulgaria 2011 2012 2013 2014 2015 12000 30%

25% 24%
10000 21% 25%
VTTL 8812 9340 9114 9751 9997 16%
21%
8000 20%
o/w liability on 6000 15%
household final 6577 7031 6648 6961 7149
4000 10%
consumption
2000 5%
government and 2011 2012 2013 2014 2015
314 384 413 421 393
NPISH final GAP % VTTL Revenues
consumption

intermediate 903 876 930 1118 1070
 In 2015, Bulgaria’s VAT revenue rebounded by 6 percent, after a 3
consumption
percent decline in 2014. The VTTL increased at a slower pace, which
o/w liability on GFCF 905 935 1020 1164 1295 resulted in a 3 percentage point drop in the VAT Gap. However, it is still
5 percentage points above the minimum level reached in 2014.
 No systemic changes were introduced to the VAT system parameters in
VAT revenue 6575 7371 7624 7451 7940
2015.
VAT GAP 2237 1970 1490 2300 2057

25% 21% 16% 24% 21%
of VTTL
VAT GAP change since -4 pp

2011
page 22 of 72
Table 3.3. Czech Republic: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (CZK million)
Czech Republic 2011 2012 2013 2014 2015 500000 30%
400000 20% 19% 25%

VTTL 333607 358555 374939 383182 404443
17% 16%
17% 20%
300000
o/w liability on 15%
household final 208391 227951 241691 245538 253480 200000
10%
consumption 100000 5%
government and 2011 2012 2013 2014 2015
16408 17834 18903 19387 21485
consumption

intermediate 69164 67714 70455 70219 72978
 In 2015, the VAT Gap continued its downward trend for the fourth
consumption
consecutive year.
o/w liability on GFCF 38706 44831 43902 48678 56826
 In 2015, the reverse charge mechanism was amended to extend to
o/w net adjustments 939 224 -12 -640 -325 domestic sales of electronics and similar goods, a measure to deter
the MTIC type of VAT fraud.
VAT revenue 276533 286116 303823 319485 337774
 Since 2014, fraudulent companies are publicly listed on tax
VAT GAP 57074 72439 71116 63697 66669
authority websites. Moreover, in 2014, electronic VAT reporting
VAT GAP as a percent became compulsory.
of VTTL 17% 20% 19% 17% 16%

-1 pp
2011
page 23 of 72
Table 3.4. Denmark: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (DKK million)
Denmark 2011 2012 2013 2014 2015 250000 20%
VTTL 197446 202841 204895 207753 213038 200000

15%
11% 11% 11%
150000 10% 10%
household final 113365 117004 119265 120912 124077 100000
consumption 50000
5%
government and 2011 2012 2013 2014 2015
5182 5230 5222 5327 5419
consumption

intermediate 49611 51888 51269 51860 53032
 The VAT Gap for Denmark continues to fluctuate between 10 and 11
consumption
percent of the VTTL, increasing by merely 0.3 percentage points in 2015.
 Denmark did not implement any significant changes to VAT rates in
o/w net adjustments 4757 5064 5430 5234 5381 2015; however, in 2014, it extended its VAT reverse charge to domestic
supplies of high value goods.
VAT revenue 176448 181618 181378 185994 189974
VAT GAP 20998 21223 23517 21759 23064

11% 10% 11% 10% 11%
of VTTL

0 pp
2011
page 24 of 72
Table 3.5. Germany: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Germany 2011 2012 2013 2014 2015 250000 20%
VTTL 210499 218025 221654 227979 233982 200000

15%
11% 11% 11%
150000 10% 10%
household final 134224 137795 139195 142349 146246 100000
consumption 50000
5%
government and 2011 2012 2013 2014 2015
5634 5694 5891 5801 6053
consumption

intermediate 37000 37914 39101 40936 41581
 The nominal growth of VAT revenues increased from 3.1 percent to 4.2
consumption
percent in 2015, surpassing the 3.7 percent growth of gross national
o/w liability on GFCF 32277 35350 36084 37575 38792 expenditures and the 2.6 percent growth of VTTL.
o/w net adjustments 1363 1274 1384 1317 1310  The VAT Gap for Germany decreased 1 percentage point during 2015, or
about EUR 2.5 billion. This amount comprised 29 percent of the total EU
VAT revenue 189910 194034 197005 203081 211616
decrease in the VAT Gap.
VAT GAP 20589 23991 24649 24898 22366
 In 2014, Germany toughened penalties for late returns and unpaid VAT
VAT GAP as a percent due and introduced a reverse charge on mobile phones. No substantial
of VTTL 10% 11% 11% 11% 10% changes were made to the rate structure in 2015.

0 pp
2011
page 25 of 72
Table 3.6. Estonia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Estonia 2011 2012 2013 2014 2015 2500 20%
VTTL 1551 1719 1808 1874 1969 2000 14%

12% 15%
12%
1500
o/w liability on 9% 10%
household final 1098 1202 1273 1322 1378 1000
5%
consumption 500
5%
government and 2011 2012 2013 2014 2015
15 16 26 28 29
consumption

intermediate 209 219 222 229 237
 In 2015, Estonia experienced yet another remarkable decrease in VAT
consumption
Gap for the second year in a row. As VTTL increased by 5 percent year to
o/w liability on GFCF 220 272 278 285 315 year, VAT revenues increased by 9 percent in nominal terms. As a result,
the VAT Gap dropped below EUR 100 million, or less than 5 percent of
the VTTL.
VAT revenue 1363 1508 1558 1711 1873
 No substantial changes were introduced to the VAT structure in 2015.
VAT GAP 188 211 250 163 96
 In 2014, several new measures, namely, a single database and a new
VAT GAP as a system for digital invoice collection targeting tax evasion and fraud were
12% 12% 14% 9% 5%
percent of VTTL introduced.
VAT GAP change

-7 pp
since 2011
page 26 of 72
Table 3.7. Ireland: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Ireland 2011 2012 2013 2014 2015 14000 20%

12000 16% 16%
VTTL 11550 12099 11725 12628 13275 15%
10000 12%
9% 10%
household final 7127 7405 7281 7520 7973 6000
consumption 4000 5%
2000
government and 2011 2012 2013 2014 2015
224 232 181 176 185
consumption

intermediate 2742 3229 3072 3490 3485
 Ireland’s VAT Gap stabilised at the 10 percent level in 2015, after falling
consumption
7 percentage points from 2012 to 2014.
 In 2014, the Irish government introduced several measures through its
o/w net adjustments 153 154 160 153 165 Finance Bill to improve VAT compliance, such as the VAT Fraud Quick
Reaction Response Mechanism.
VAT revenue 9755 10219 10372 11521 11955
 No substantial changes to VAT structure occurred in 2015.
VAT GAP 1795 1880 1353 1106 1319
VAT GAP as a
16% 16% 12% 9% 10%
percent of VTTL
VAT GAP change

-6 pp
since 2011
page 27 of 72
Table 3.8. Greece: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Greece 2011 2012 2013 2014 2015
VTTL 22677 19192 18751 16966 17964 25000 34% 33%

40%
20000 29% 28%
25% 30%
o/w liability on
15000
household final 16125 14017 13498 12381 13199 20%
10000
consumption 10%
5000
government and 2011 2012 2013 2014 2015
876 819 582 431 567
consumption

intermediate 2001 1886 1722 1598 1676
 In 2015, Greek real GDP continued its contraction, having fallen almost
consumption
10 percent since 2011.
 In July 2015, several VAT rates were raised as a measure to increase
o/w net adjustments 368 250 267 244 266 revenue. The super reduced rate for accommodation was raised to the
reduced level, and the rates on several food products, fertilisers, and
VAT revenue 15021 13713 12593 12676 12885
other goods were raised to the full level. Also, the mainland rate was set
VAT GAP 7656 5479 6158 4290 5079 on five islands that previously had 30 percent lower rates.
VAT GAP as a  These two opposing factors resulted in EUR 1 billion of additional VTTL.
percent of VTTL 34% 29% 33% 25% 28% However, actual revenues increased by only EUR 200 million. Hence, the
VAT Gap increased by 3 percentage points, from 25 to 28 percent.
VAT GAP change

-6 pp
since 2011
page 28 of 72
Table 3.9a. Spain: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Spain 2011 2012 2013 2014 2015 80000 20%

70000
VTTL 64526 62761 68926 69400 71092 60000 13% 15%
12%
50000 10%
o/w liability on 40000 8% 10%
household final 44891 46291 50150 50979 52568 30000
consumption 20000 4% 5%
10000
government and 2011 2012 2013 2014 2015
2454 2273 2387 2376 2447
consumption

intermediate 8468 8253 8639 8377 8331
 Trends in 2015 were similar to those of 2014. The VAT Gap continued its
consumption
decline due to strong revenue performance. Overall, the 8 percent
o/w liability on GFCF 8463 5632 7353 7241 7279 growth in revenue can be decomposed into a 3 percent increase in the
net base and a 5 percent increase in VAT compliance.
 In 2015, a VAT deferral regime was introduced for large importers.
VAT revenue 55904 56652 60951 63643 68589
VAT GAP 8622 6109 7975 5757 2503
VAT GAP as a
13% 10% 12% 8% 4%
percent of VTTL
VAT GAP change

-9 pp
since 2011
page 29 of 72
Table 3.9b. Spain: Alternative Estimates
Spain 2011 2012 2013 2014 2015
VAT Gap based on

7150 4417 4337 2645 1120
alternative data
VAT Gap based on

alternative data, as a 11% 1% 6% 4% 2%
percent of VTTL
Note: Adjusting revenues for the continuing reduction in the stock of claims and adjusting the VTTL for the difference between national accounting and tax
conventions in the construction sector based on the data received from Spanish Tax Authorities led to a downward revision of the VAT Gap for the entire period
2011-2015.
page 30 of 72
Table 3.10. France: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
France 2011 2012 2013 2014 2015 200000 20%
VTTL 152667 162380 162708 170435 171735 150000 15%

12% 13%
11% 12%
o/w liability on
100000 8% 10%
household final 94180 96942 96958 101684 103383
government and 2011 2012 2013 2014 2015
1292 1379 1426 1561 1577
consumption

intermediate 24610 25760 26230 27120 27499
 The VAT Gap in France has been fluctuating around 12 percent since
consumption
2012, after the 4 percentage point surge in 2011.
 A stagnant base and a moderate 2 percent increase in VAT revenue
o/w net adjustments 4482 4802 4961 5436 5288 contributed to a 1 percentage point reduction in the VAT Gap in 2015.
VAT revenue 140552 142527 144490 148454 151622  In January 2015, France extended electronic audit filing to non-resident
VAT companies. Previously, this was only required from resident
VAT GAP 12115 19853 18218 21981 20113
companies.
VAT GAP as a
percent of VTTL 8% 12% 11% 13% 12%
VAT GAP change

+4 pp
since 2011
page 31 of 72
Table 3.11. Croatia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2014-2015 (HRK million)
Croatia 2014 2015

50000 10%
VTTL 42835 45084
40000 8%
4% 4%
household final 31244 32017
20000 4%
consumption
10000 2%
government and 2014 2015
1723 1690
consumption

intermediate 5421 6782
 Croatian estimates are available as of 2014, following the publication of
consumption
ESA10 standard national accounts data.
o/w liability on GFCF 4288 4032
 The VAT Gap estimate for 2014 was revised downward since the
o/w net adjustments 159 564 previous VAT Gap report due to the correction of the weighted average
rate calculation.
VAT revenue 40983 43315
 The VAT Gap in Croatia decreased marginally by 0.4 percentage points
VAT GAP 1853 1769
in 2015.
VAT GAP as a
4% 4%
percent of VTTL
page 32 of 72
Table 3.12a. Italy: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Italy 2011 2012 2013 2014 2015 160000 29% 30%

35%
140000 29% 28%
26% 30%
VTTL 139468 134560 133986 135376 136127 120000 25%
100000
80000
household final 99560 97624 95936 97871 99158 15%
60000
20000 5%
government and 2011 2012 2013 2014 2015
1982 2098 2095 2070 2003
consumption

intermediate 18296 17716 18282 18478 18460
 No systemic changes to the applicable rates were introduced to the
consumption
Italian VAT system in 2015.
 As a measure to combat fraud, the VAT split payments system was
o/w net adjustments 4594 4353 4108 3745 3136 implemented in 2015 through the “Italian Stability Law”. It requires
public bodies to pay VAT directly into a special Treasury bank account.
VAT revenue 98650 96170 93921 97071 101034
 In November 2015, a domestic reverse charge was imposed on sales of
VAT GAP 40818 38390 40065 38305 35093
laptops, game consoles, and computer tablets.
VAT GAP as a
29% 29% 30% 28% 26%  The VAT Gap for Italy decreased by 2 percentage points in 2015.
percent of VTTL
VAT GAP change

-3 pp
since 2011
page 33 of 72
Table 3.12b. Italy: Alternative Estimates
Italy 2011 2012 2013 2014 2015
VAT Gap based on

41750 36810 37460 36856 35879
alternative data
VAT Gap based on

percent of VTTL
Note: the estimates above are based on adjusted revenues for the changes in outstanding stocks of net reimbursement claims (to better approximate accrued
revenues) and Italy’s own estimates of illegal activities, namely illegal drugs and prostitution activities.
page 34 of 72
Table 3.13. Cyprus: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2015 (EUR million)
Cyprus 2015 Highlights
VTTL 1639  Thanks to the finalisation of national accounts and figures in the ESA10
standard, estimates for Cyprus are included in the VAT Gap Report as of
o/w liability on
2015.
household final 1034
consumption  Cyprus’ VAT Gap in 2015 is estimated to be 7 percent, which is 3
percentage points below the EU average.
o/w liability on
government and
27
NPISH final
consumption
o/w liability on
intermediate 416
consumption
o/w liability on GFCF 141
o/w net adjustments 21
VAT revenue 1517
VAT GAP 122

7%
of VTTL
page 35 of 72
Table 3.14. Latvia: VAT Revenue VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Latvia 2011 2012 2013 2014 2015 2500 0,4

32%
2000 0,3
VTTL 2032 2068 2213 2207 2287 24% 24%
1500 19% 18%
0,2
household final 1555 1633 1679 1715 1770 0,1
500
consumption
0 0
o/w liability on 2011 2012 2013 2014 2015
government final 44 47 44 45 47 GAP % VTTL Revenues
consumption

intermediate 303 296 317 325 341
 The VAT Gap in Latvia continued its downward trend and decreased 1
consumption
percentage point further in 2015. Since 2011, the VAT Gap has
o/w liability on GFCF 196 194 278 238 246 decreased by 14 percentage points.
o/w net adjustments -65 -102 -105 -117 -116  The previously published estimates for Latvia were revised in the
current report due to the publication of updated SUT and national
VAT revenue 1374 1570 1690 1787 1876
accounts data.
VAT GAP 658 498 523 420 411
 There were no substantial changes to VAT legislation in 2015.
VAT GAP as a
 Earlier in 2014, a new register of “high risk” entities was created with an
percent of VTTL 32% 24% 24% 19% 18% obligation for the tax authorities to provide information on such
individuals to the commercial register.
VAT GAP change

-14 pp
since 2011
page 36 of 72
Table 3.15. Lithuania: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Lithuania 2011 2012 2013 2014 2015 5000 40%

29% 31% 29%
VTTL 3465 3638 3686 3816 3925 4000 28% 26% 30%

20%
household final 2788 2941 3010 3132 3232 2000
consumption 1000
10%
government and 2011 2012 2013 2014 2015
74 68 66 69 73
consumption

intermediate 341 377 341 375 372
 The estimates for Lithuania were revised significantly downward with
consumption
respect to the 2016 Report due to the correction of the methodology in
o/w liability on GFCF 372 378 398 415 454 the application of SUT data.
o/w net adjustments -110 -126 -129 -174 -206  The VAT Gap in Lithuania continues a downward trend since 2012,
having decreased by another 2 percentage points in 2015.
VAT revenue 2444 2521 2611 2764 2888
 The rate for accommodation was lowered to 9 percent in 2015.
VAT GAP 1021 1117 1075 1052 1037
VAT GAP as a
29% 31% 29% 28% 26%
percent of VTTL
VAT GAP change

-3 pp
since 2011
page 37 of 72
Table 3.16. Luxembourg: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Luxembourg 2011 2012 2013 2014 2015 5000

14%
VTTL 3019 3301 3544 3823 3634 4000 12%
10%
3000 7%
o/w liability on 8%
5%
household final 1079 1131 1143 1181 1452 2000 5% 4% 6%
3%
consumption 4%
1000
2%
government and 2011 2012 2013 2014 2015
30 33 31 31 34
consumption

intermediate 563 573 611 691 904
 In 2015, Luxembourg VAT revenue suffered a EUR 738 million loss due
consumption
to the introduction of the MOSS regime. MOSS obliged VAT from
o/w liability on GFCF 305 317 306 319 382 electronic services to be paid to the country of customer residence.
o/w net adjustments 1041 1247 1453 1601 862  Standard, reduced, and parking rates were increased by 2 percentage
points in 2015 to partly offset the anticipated loss of revenue.
VAT revenue 2879 3164 3429 3732 3432
 Total liability contracted by about 5 percent in 2015; however, actual
VAT GAP 140 137 115 90 202
revenues dropped 8 percent. The VAT Gap increased to 6 percent of the
VAT GAP as a VTTL.
5% 4% 3% 2% 6%
percent of VTTL
VAT GAP change

+1 pp
since 2011
page 38 of 72
Table 3.17. Hungary: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (HUF million)
Hungary 2011 2012 2013 2014 2015 5000000 21% 22% 25%
21%
4000000 17% 20%
VTTL 3026487 3351065 3407061 3629657 3834330
14%
3000000 15%
o/w liability on
2000000 10%
household final 2160869 2381684 2439438 2524595 2612814
1000000 5%
consumption
0 0%
o/w liability on 2011 2012 2013 2014 2015
consumption

intermediate 415184 446366 429682 465428 490771
 VAT compliance continued to improve in 2015, with the VAT Gap falling
consumption
by a further 3 percentage points. Hungary remained the Member State
o/w liability on GFCF 299953 338232 362648 455410 543345 with the highest standard rate (27 percent).
o/w net adjustments 28201 67815 52935 50859 47475  In 2015, Hungary continued to introduce additional anti-fraud
measures:
VAT revenue 2379253 2627571 2693555 3011162 3307312
 All intra-EU movements of goods by road transport must be
VAT GAP 647234 723495 713506 618495 527019
declared in the electronic EKAER system;
VAT GAP as a  A domestic reverse charge was introduced for steel
percent of VTTL 21% 22% 21% 17% 14% products; and
 The threshold for reporting domestic recapitulative
statements is lowered for invoices from HUF 2 to 1 million.
VAT GAP change
-7 pp
since 2011
page 39 of 72
Table 3.18. Malta: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Malta 2011 2012 2013 2014 2015 1200 50%

41% 42% 41% 40%
VTTL 882 938 992 1063 883 1000 40%
800
600 23%
household final 386 412 429 448 474 20%
400
consumption 10%
200
government and 2011 2012 2013 2014 2015
13 15 15 17 17
consumption

intermediate 445 465 496 542 318
 The new “place of supply by the residence of customer” rule for
consumption
electronic services had a negative effect on the intermediate
o/w liability on GFCF 37 45 50 55 71 consumption liability of Malta’s e-gambling industry by making a part of
the input VAT recoverable (see Section a in Annex A).
 As a result of the decline in VTTL, there was a considerable drop in the
VAT revenue 520 540 582 642 684
VAT Gap in 2015 to 20 percent. However, it remains 13 percentage
VAT GAP 362 398 410 421 199 points higher than the EU average of 10 percent.
VAT GAP as a  VAT on e-books was lowered to 5 percent in 2015.

41% 42% 41% 40% 23%
percent of VTTL
VAT GAP change

-18 pp
since 2011
page 40 of 72
Table 3.19a. Netherlands: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Netherlands 2011 2012 2013 2014 2015
VTTL 46173 45971 47166 47050 48751

60000 20%
40000 10% 10%
household final 24285 24745 25882 25363 25952 9% 9%
8% 10%
consumption 20000
5%
government and 2011 2012 2013 2014 2015
615 586 565 556 554
consumption

intermediate 12054 12330 13000 13121 13348
 The VAT Gap in the Netherlands fluctuated around 9-10 percent during
consumption
2011-2014, decreasing slightly in 2015, as the growth of revenues
o/w liability on GFCF 8750 7824 7205 7502 8389 outpaced the growth of the VTTL.
o/w net adjustments 469 487 514 508 507  During the course of 2015, the 6 percent reduced rate for the
renovation and repair of buildings was increased to the standard 21
VAT revenue 41610 41699 42424 42708 44879
percent rate. There were no other substantial changes implemented in
VAT GAP 4563 4272 4742 4342 3872 the VAT structure.
VAT GAP as a
percent of VTTL 10% 9% 10% 9% 8%
VAT GAP change

-2 pp
since 2011
page 41 of 72
Table 3.19b. Netherlands: Alternative Estimates
Netherlands 2011 2012 2013 2014 2015
VAT Gap based on

4023 3724 4168 3772 3296
alternative data
VAT Gap based on

percent of VTTL
Note: These estimates are obtained under alternative assumptions regarding the limited right to deduct benefits in kind and business entertainment, which
are limited to EUR 227 per employee annually. To calculate a lower bound estimate of the VAT Gap, we assume that such deductions were applied to all
employees currently working in Netherlands.
page 42 of 72
Table 3.20. Austria: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Austria 2011 2012 2013 2014 2015

35000 20%
VTTL 26189 26625 27624 28084 28589 30000
25000 15%
20000 10%
8% 8% 10%
household final 17767 18307 18995 19305 19470 15000
5000
government and 2011 2012 2013 2014 2015
778 794 758 951 986
consumption

intermediate 3626 3750 3888 3956 4091
 The VAT Gap in Austria averaged 9.2 percent over the five year period.
consumption
 In 2015, the VAT Gap decreased by 1.4 percentage points.
 During 2014, Austria introduced reverse VAT charges on a range of
goods, including: the supply of gas and electricity, the supply of precious
VAT revenue 23394 24507 24895 25386 26232 metals, and sales of laptops, tablets, and games consoles.
VAT GAP 2795 2118 2730 2699 2357  There were no major changes in the VAT rules during 2015.
VAT GAP as a
11% 8% 10% 10% 8%
percent of VTTL
VAT GAP change

-3 pp
since 2011
page 43 of 72
Table 3.21. Poland: VAT Revenue VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (PLN million)
Poland 2011 2012 2013 2014 2015 200000 27% 26% 30%
25% 25%
25%
VTTL 154570 159072 158351 163321 166694 150000 21%
20%
household final 102061 108658 109749 112706 114645
10%
consumption 50000
5%
government and 2011 2012 2013 2014 2015
6737 6864 6716 7005 7269
consumption

intermediate 22252 22923 22385 23723 24950
 Since 2012, the VAT Gap fell by approximately PLN 2 billion and 2
consumption
percentage points of the VTTL. However, it remained almost unchanged
o/w liability on GFCF 19524 16423 15306 16938 17522 in 2015.
o/w net adjustments 3996 4203 4195 2949 2308  Reverse charges on the sales of laptops, mobile phones, and tablets
were introduced in July 2015.
VAT revenue 122647 116265 116607 122671 125836
 Several measures concerning tax compliance and efficiency were
VAT GAP 31923 42807 41744 40650 40858
introduced in 2014. In particular, the government consolidated
VAT GAP as a organisational functions and introduced a single database of tax
21% 27% 26% 25% 25%
percent of VTTL identification numbers.
VAT GAP change

+4 pp
since 2011
page 44 of 72
Table 3.22. Portugal: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Portugal 2011 2012 2013 2014 2015 20000 20%

16% 16%
VTTL 16461 16581 16288 16914 17357 15000 13% 13% 15%
11%
household final 11432 12371 12239 12818 13112
consumption 5000 5%
government and 2011 2012 2013 2014 2015
264 223 219 218 265
consumption

intermediate 2773 2646 2606 2649 2673
 Portugal’s VAT Gap decreased by over 3 percentage points in 2014 to its
consumption
lowest level since 2011. Roughly half of the growth of VAT revenue can
o/w liability on GFCF 1665 981 887 894 955 be attributed to the growing economy, with the other half due to
increased VAT compliance.
 No substantial changes were introduced to the VAT regime in 2015.
VAT revenue 14265 13995 13710 14682 15368
VAT GAP 2196 2586 2578 2232 1989
VAT GAP as a
13% 16% 16% 13% 11%
percent of VTTL
VAT GAP change

-2 pp
since 2011
page 45 of 72
Table 3.23. Romania: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (RON million)
100000 43% 50%
Romania 2011 2012 2013 2014 2015
37% 39% 39% 37%
80000 40%
VTTL 77123 79881 84547 89390 91569
60000 30%
o/w liability on
household final 46751 49115 49611 54031 55053 40000 20%
government and 2011 2012 2013 2014 2015
3943 4932 4502 4625 4658
consumption

intermediate 7870 7823 7674 9548 9106
 In 2015, VAT revenues increased by a record level of 12.6 percent per
consumption
year, twice as high as nominal GDP growth. The estimated VAT Gap
o/w liability on GFCF 15762 15105 20944 18266 19915 returned to its 2011 level. However, Romania’s VAT Gap of 37 percent
remains one of the highest in the EU.
 In 2014, the reverse charge mechanism was introduced by the
VAT revenue 48375 49066 51745 51086 57520
Romanian government for the supply of energy, for green certificates,
VAT GAP 28749 30815 32802 38304 34049 and in the wood industry.
VAT GAP as a  In 2015, the VAT rate for touristic services was lowered to 9 percent.
37% 39% 39% 43% 37%
percent of VTTL There were no other substantial changes.
VAT GAP change

0 pp
since 2011
page 46 of 72
Table 3.24. Slovenia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Slovenia 2011 2012 2013 2014 2015 4000 20%

3500
VTTL 3179 3165 3209 3411 3406 3000 15%
2500
o/w liability on 2000 9% 10%
8%
household final 2271 2285 2284 2412 2411 1500 6% 5% 6%
consumption 1000 5%
500
government and 2011 2012 2013 2014 2015
65 61 62 63 64
consumption

intermediate 407 410 428 445 453
 During the 2011-2015 period, the VAT Gap in Slovenia fluctuated
consumption
around the average level of 6.5 percent.
 A moderate increase in VAT revenues combined with stagnant
o/w net adjustments 113 106 101 88 78 expenditures resulted in the 2 percentage point decrease of the VAT
Gap in 2015.
VAT revenue 2995 2888 3046 3155 3219
 In 2015, the reverse charge mechanism was introduced for domestic
VAT GAP 184 277 164 256 188
sales on carbon trading transactions as an anti-VAT fraud measure.
6% 9% 5% 8% 6%  In 2015, Slovenia remained among the top five Member States with the
of VTTL
lowest VAT Gap in the EU.

0 pp
2011
page 47 of 72
Table 3.25. Slovakia: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Slovakia 2011 2012 2013 2014 2015 10000 50%

38%
8000 33% 40%
VTTL 6570 6960 7048 7227 7677 28% 31% 29%
6000 30%
household final 4873 5029 5101 5239 5357
2000 10%
consumption
0 0%
o/w liability on 2011 2012 2013 2014 2015
consumption

intermediate 822 928 903 932 997
 The VAT Gap in Slovakia continued its decrease in 2015 since its peak in
consumption
2012. In 2015, the VAT Gap fell by an additional 2 percentage points,
o/w liability on GFCF 607 745 725 751 994 with growth in revenues more than twice as high as growth in nominal
GDP and VTTL.
o/w net adjustments 19 19 11 -22 -17
 No substantial changes were made to the VAT regime in 2015.
VAT revenue 4711 4328 4696 5021 5420
 Several measures to improve VAT compliance were introduced earlier
VAT GAP 1859 2632 2352 2206 2256
in 2014. Among others, Slovakia’s 2014 tax reforms included a wider
VAT GAP as a introduction of cash registers. Furthermore, starting from the fourth
28% 38% 33% 31% 29%
percent of VTTL quarter of 2013, the government launched the VAT receipt lottery.
VAT GAP change

+1 pp
since 2011
page 48 of 72
Table 3.26. Finland: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (EUR million)
Finland 2011 2012 2013 2014 2015 25000

14%
VTTL 18261 18919 19959 20159 20392 20000 12%
10%
15000 7%
5% 5% 5%
household final 10154 10513 11041 11074 11323 10000 6%
4%
consumption 5000
2%
2011 2012 2013 2014 2015
government and
367 372 456 465 468
consumption

intermediate 3895 3987 4293 4433 4453
 Finland’s VAT Gap continued to increase its share in the VTTL. Despite
consumption
this unfavourable trend, Finland, with its 6.9 percent Gap, remains one
o/w liability on GFCF 3295 3570 3622 3583 3537 of the countries with the best VAT compliance in the EU.
o/w net adjustments 550 478 547 604 610  No systemic changes were introduced to the parameters of the Finnish
VAT system in 2015.
VAT revenue 17315 17987 18888 18948 18974
VAT GAP 946 932 1071 1211 1418
VAT GAP as a
5% 5% 5% 6% 7%
percent of VTTL
VAT GAP change

+2 pp
since 2011
page 49 of 72
Table 3.27. Sweden: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (SEK million)
Sweden 2011 2012 2013 2014 2015

400000 10%
VTTL 340051 348981 345128 354439 373516 8%
300000 6%
6%
o/w liability on
200000 3% 4%
household final 181072 185455 182692 188167 195314 2%
0% 2%
consumption 100000
0%
o/w liability on 0 -2%
-1%
government and 2011 2012 2013 2014 2015
15297 18716 19263 16245 17115
consumption

intermediate 81901 81284 81022 83875 90383
 In 2013 and 2014, Sweden recorded the lowest VAT Gap in the EU-27,
consumption
approaching a nil VAT Gap in 2014.
 Due to the record 7 percent growth in revenues combined with the
o/w net adjustments 7105 7762 5377 5924 6264 much more moderate 4 percent growth in the net base, Sweden’s VAT
revenues exceeded the estimated VTTL in 2015. Of the SEK 25.5 billion
VAT revenue 330770 329311 337823 353439 378830
increase in revenues, SEK 14 billion can be attributed to the decline in
VAT GAP 9281 19670 7305 1000 -5314 VAT refunds remitted by the state.
VAT GAP as a  Since 2015, import VAT is invoiced directly to the Tax Authority instead
3% 6% 2% 0% -1% of the Customs Authority.
percent of VTTL
VAT GAP change  Possible reasons for negative VAT Gap: use of cash vs accrual revenues,
since 2011 -4 pp underestimation of GFCF liabilities, or incompleteness of national
accounts.
page 50 of 72
Table 3.28. United Kingdom: VAT Revenue, VTTL, Composition of VTTL, and VAT Gap, 2011-2015 (GBP million)
United Kingdom 2011 2012 2013 2014 2015

200000 20%
VTTL 124553 128958 134792 142033 148184
150000 15%
o/w liability on 10% 10% 11% 11%
9%
household final 82373 85172 88706 94064 99409 100000 10%
government and 2011 2012 2013 2014 2015
2597 2556 2537 2618 3131
consumption

intermediate 29271 28730 29021 29773 30805
 The VAT Gap in the UK remained stable in 2015, increasing over the
consumption
year by just 0.3 percentage points. Over the course of the entire period
o/w liability on GFCF 8578 10267 11436 13317 13614 (2011-2015), the share of the VAT Gap increased by 2 percentage
points.
 The VAT Gap in the UK is equal to the median Gap of EU-28 Member
VAT revenue 113534 116283 120784 126946 132063
States.
VAT GAP 11019 12675 14008 15087 16121
 No substantial changes were made to the VAT regime in the UK
VAT GAP as a throughout 2015.
percent of VTTL 9% 10% 10% 11% 11%
VAT GAP change

+2 pp
since 2011
page 51 of 72
IV. Policy Gap Measures
In this Chapter, we present an update of the series of estimates of the Policy Gap and its
components for the EU-28.
As discussed in 2016 Report, the Policy Gap captures the effects of applying multiple rates and
exemptions on the theoretical revenue that could be levied in a given VAT system. In other words,
the Policy Gap is an indicator of the additional VAT revenue that a Member State could
theoretically (i.e. in the case of perfect tax compliance) generate if it applied a uniform VAT rate
on all goods and services. Due to the idealistic assumption of perfect tax compliance, the practical
interpretation of the Policy Gap draws criticism. Nonetheless, the assumption of perfect VAT
collectability is indispensable, as interdependencies between tax compliance and rate structure
are not straightforward. Furthermore, the example of the negative VAT Gap in Sweden shows that
the assumption of perfect tax compliance is not as idealistic as it may seem.
The Policy Gap could be further decomposed into different components of revenue loss, as we
show in Section f in Annex A. Such elements are, for instance, the Rate Gap and the Exemption
Gap, which capture the loss in VAT liability due to the application of reduced rates, and the loss in
liability due to the implementation of exemptions.
Moreover, following Barbone et al. (2013), the Policy Gap and its components could be further
adjusted to address the issue of the extent to which the loss of theoretical revenue depends on
the decision of policymakers. Measures that exclude liability from the final consumption of
“imputed rents” (the notional value of home occupancy by homeowners), financial services, and
the provision of public goods and services, as charging them with VAT is impractical or beyond the
control of national authorities, are named the “Actionable Gaps”.
Results for 2015
The estimates of the Policy Gap, Rate Gap, Exemption Gap, Actionable Policy Gap, and Actionable
Exemption Gap for the EU-28 Member States are presented in Table 4.1.
For the EU overall, the average Policy Gap level is 44 percent. In other words, VAT from final
consumption and investment, even in the case of 100 percent compliance, generates just slightly
more than half of what it could bring if taxed uniformly at the full rate. Of this 44 percent, 9
percentage points are due to the application of various reduced and super reduced rates (the Rate
Gap). Countries with the most flat level of rates in the EU, according to the Rate Gap, are Denmark,
Slovakia, Estonia, and Bulgaria. Installing a uniform Standard Rate would generate less than 3
percent of notional additional revenue in these countries. On the other side of spectrum are
countries with the highest Rate Gap: Cyprus’ revenue could increase by more than 30 percent,
and in Italy, Poland, and Spain by about 15 percent, if only the Standard Rate were applied.
The Exemption Gap, or the average share of Ideal Revenue lost due to various exemptions, is 35
percent in the EU on average. Member States with the highest Exemption Gap are Spain (44.93
percent), UK (43.44 percent) and Finland (43.25 percent), whereas the lowest value of the Gap
was observed in Cyprus (15.20 percent), Malta (15.65 percent) and Romania (20.20 percent). The
Exemption Gap in Spain is relatively high due to the application of other than VAT indirect taxes
in the Canary Islands, Ceuta, and Melilla (see Section c in Annex A). The largest part of Exemption
page 52 of 72
gap is composed of exemptions on services that cannot be taxed in principle, such as imputed
rents, the provision of public goods by the government, or financial services. The remaining level
of “Actionable” Exemption Gap is about 8 percent, on average.
The Actionable Policy Gap, a combination of the Rate Gap and the Actionable Exemption Gap, is,
on average, 16 percent. This figure shows the combined reduction of Ideal Revenue due to
reduced rates and the exemptions that can possibly be removed.
page 53 of 72
Table 4.1. Policy Gap, Rate Gap, Exemption Gap, and Actionable Gaps
A B C D E F G H
Policy Gap Rate Gap Exemption o/w Imputed o/w Public o/w Financial Actionable Exemption Actionable Policy Gap
(%) (%) Gap (%) Rents (%) Services (%) Services (%) Gap (C - D - E - F) (%) (G + B) (%)
BE 52.53 11.97 40.56 6.93 25.72 3.77 4.14 16.11
BG 27.95 2.27 25.68 9.78 8.20 1.15 6.55 8.83
CZ 38.77 5.50 33.27 8.27 15.40 2.29 7.30 12.81
DK 41.63 0.75 40.89 7.33 28.60 5.02 -0.06 0.69
DE 44.33 7.07 37.26 6.62 21.02 2.91 6.71 13.78
EE 36.07 2.56 33.51 7.06 14.84 1.98 9.63 12.19
IE 51.62 9.05 42.57 10.15 23.37 -0.33 9.37 18.42
EL 53.28 11.25 42.03 11.00 15.87 2.95 12.21 23.45
ES 59.53 14.59 44.93 10.91 18.85 2.77 12.40 27.00
FR 52.63 11.66 40.97 9.25 22.51 3.17 6.05 17.70
HR 36.05 8.80 27.24 8.28 14.47 1.63 2.86 11.66
IT 53.90 15.47 38.43 10.80 19.21 1.33 7.09 22.57
CY 45.04 29.83 15.20 9.22 17.98 -4.61 -7.39 22.44
LV 38.52 3.15 35.37 9.93 14.33 0.86 10.25 13.40
LT 28.27 4.01 24.26 5.26 12.38 -3.51 10.13 14.14
LU 42.25 16.25 26.00 4.96 26.56 -15.23 9.71 25.96
HU 42.10 4.61 37.49 7.14 16.35 3.72 10.29 14.90
MT 31.31 15.66 15.65 4.73 16.34 -12.66 7.24 22.90
NL 51.93 11.08 40.86 6.44 26.05 6.01 2.36 13.44
AT 45.61 10.99 34.62 7.01 21.73 2.35 3.53 14.52
PL 48.75 15.45 33.31 3.44 14.39 3.03 12.43 27.88
PT 50.75 11.58 39.17 8.68 20.03 2.99 7.47 19.05
RO 25.99 5.79 20.20 9.49 7.60 0.09 3.01 8.81
SI 46.81 11.68 35.14 6.62 16.40 2.68 9.44 21.12
SK 36.65 1.47 35.19 7.06 13.10 2.79 12.24 13.71
FI 50.33 7.07 43.25 11.29 22.25 4.70 5.01 12.08
SE 48.11 7.81 40.31 5.76 27.33 3.83 3.38 11.19
UK 52.45 8.68 43.77 11.40 20.13 3.68 8.56 17.24
EU-28 44.04 9.50 34.54 8.03 18.61 1.05 6.86 16.36
page 54 of 72
Annex A. Methodological Considerations
The Methodological Annex is structured as follows. Subsection a describes the impact of the
introduction of the MOSS system on the VAT Gap estimates. Subsection b discusses sources of
revisions to figures published in the 2016 Report. Subsection d, e and f repeat the overview of the
VAT Gap and Policy Gap estimation methodology, which remained the same as published in the
2016 Report (Poniatowski et al. 2016).
a. New rule for place of supply of electronic services and its

application to the VAT Gap
The new rule for taxation of electronic and digital services came into force on 1st January 2015.
Since the amendment of the rules, telecommunications, broadcasting and electronically supplied
services (including e-gambling) were taxed in the country where the customer (either business or
consumer) resided. In order to ease the compliance burden, each MS had installed an Internet
portal – the MOSS, the only place where the company would need to register and pay its VAT
liability.
Currently, Member States take the responsibility to remit VAT to each other Member State,
according to the customer’s residence. In the transition year of 2015, Member States were
allowed to keep 30 percent of the e-services VAT revenue for themselves.
From the VAT Gap perspective, the new rule had an impact on overall household consumption
liability, and on the special cases of Luxembourg and Malta.
1) The VAT liability estimates derived from the final consumption from USE tables actually
became more accurate. This can be illustrated by an example. Suppose, a household in
Germany had purchased a EUR 200 worth of digital services of which half was supplied
from Germany, half from Luxembourg.
Before 2015, the actual liability was split between EUR 16 paid to Germany and
15 euro paid to Luxembourg.
After 2015, all of the liability is paid to Germany (except for EUR 5 temporary
retention fee left to Luxembourg).
In both cases, SUT would attribute the whole amount of EUR 200 to the final household
consumption, implying EUR 31 of the VAT liability to Germany. Therefore, the household liability
estimates derived from SUT become closer to the actual liability under the new rule.
The overall effect of this correction to the household liability is rather small: taxable digital services
fall unto category “J69_J60: Motion picture, video and television programme production services,
sound recording and music publishing; programming and broadcasting services”, which on
average make up for just a half of the percent of total household consumption.
2) In the case of Luxembourg, the effect was quite substantial as Luxembourg with its lowest
statutory VAT rate in the EU was the top registration destination for digital services
companies. All in all, in 2014 Luxembourg derived additional EUR 1,200 million from the
VAT on e-services, making up almost one-third of the total VTTL. In order to account for
page 55 of 72
this additional revenue, in this, as well as in previous VAT Gap reports, we inflated the
VTTL estimates by the special adjustment, using the official “e-commerce” revenue
provided by the Authorities. As a result of the implementation of the new rules as of 2015,
the value of adjustment fell significantly. Luxembourg still kept a portion of the revenue
according to the transitional retention rate in 2015, but it is expected to decline in 2016
and further years.
3) In the case of Malta, the new rule had an effect via the third channel, namely the change
in the amount of non-deductible intermediate consumption of the gambling and games
of chance industry. Unlike other digital services, gambling and betting is exempt in all EU
Member States. Moreover, the intermediate consumption of these companies was to a
large extent non-deductible. Malta stands out from other EU Member States due to the
importance of e-gambling industry in the economy. Before the new rule, the IC of “R90-
R92 industry”, which includes gambling and betting together with creative arts, museums,
entertainment and other cultural services made up more than 47 percent of all
intermediate consumption liability in Malta.
Despite a large reduction in the estimated VTTL the amount of actually collected, revenue
in Malta did not show a decline in 2015. This could suggest, that the e-gambling industry
had previously found ways to deduct VAT even before the new rule was implemented.
b. Source of revisions of VAT Gap estimates
Every year, the estimates of the VAT Gap are updated and revised backwards. There are three
different sources of such revisions:
1) Updates in the underlying national accounts data published by Eurostat: updates in VAT
revenues, new supply and use tables, revised industry specific growth rates, etc.
2) Updates in the estimated GFCF liability, based on the new information from the ORS
submissions on taxable shares of GFCF by five sectors: households, government, NPISH and
exempt financial and non-financial enterprises.
3) Revision of the parameters of the VTTL model: weighted average rates, pro-rata coefficients
and net adjustments, either due to new information from ORS or due to correcting errors in the
previous computation.
The breakdown of three different components of the revisions in 2014 figures are presented in
Table A.1.
page 56 of 72
Table A.1. Source of revisions of VAT Gap estimates
Changes due Changes

2016 2017 to updates due to Changes to
estimates estimates in national revised revision of other
for 2014 for 2014 accounts estimates parameters
data in GFCF
BE 8.4 9.8 -0.7 -0.9 0.3

BG 19.8 23.6 -0.6 -1.8 -1.4
CZ 16.1 16.6 0.2 -0.7 0.0
DK 9.8 10.5 -1.0 -0.3 0.6
DE 10.4 10.9 -0.2 -0.7 0.4
EE 9.6 8.7 0.0 -0.4 1.2
IE 9.4 8.8 0.6 0.1 0.0
EL 28.0 25.3 2.3 -1.5 1.9
ES 8.9 8.3 1.1 -1.3 0.7
FR 14.2 12.9 0.3 -0.2 1.2
HR 8.7 4.3 -0.4 -0.9 5.6
IT 27.6 28.3 0.9 -0.4 -1.2
LV 23.4 19.0 5.3 -1.3 0.4
LT 36.8 27.6 -4.1 -0.2 13.6
LU 3.8 2.4 0.2 0.5 0.7
HU 18.0 17.0 0.0 0.4 0.5
MT 35.3 39.6 -3.1 -0.3 -0.9
NL 10.4 9.2 1.2 0.3 -0.4
AT 10.2 9.6 0.2 -0.7 1.1
PL 24.1 24.9 -1.1 0.1 0.2
PT 12.5 13.2 -1.2 0.8 -0.3
RO 37.9 42.9 -2.1 -2.1 -0.9
SI 8.1 7.5 -0.6 -0.1 1.3
SK 30.0 30.5 1.1 -0.5 -1.2
FI 6.9 6.0 2.6 -1.7 0.0
SE 1.2 0.3 0.3 0.1 0.6
UK 10.1 10.6 1.7 -1.7 -0.5
EU-27 16.3 15.9 0.1 -0.6 0.9
c. Country specific issues
Tank tourism from Germany, France and Belgium to Luxembourg – the adjustment of the VTTL
in Luxembourg due to fuel and services, which is exported from within the country to non-
residents, but still generate VAT. These transactions, which are subject to VAT, but not accounted
for in Eurostar increase the VTTL in Luxembourg. However, due to unavailability of data on the
page 57 of 72
share of tourism by their residence, amendments have not been applied to Belgian, French and
German figures.
Exemption Gap in Spain – both the Exemption Gap and the Actionable Exemption Gap in Spain
include the loss of ideal VAT due to non-application of VAT in the Canary Islands, Ceuta, and
Melilla. The value of both gaps would be reduced by 5.6 percentage points if this loss was excluded
the estimation.
d. Decomposition of VAT Revenue

As VAT Revenue (VR) is the difference between the VTTL and the VAT Gap ( 𝑉𝑅 = 𝑉𝑇𝑇𝐿 −
𝑉𝐴𝑇 𝐺𝑎𝑝) , and the VTTL is a product of the effective rate and the base ( 𝑉𝑇𝑇𝐿 =
𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 × 𝑏𝑎𝑠𝑒), VAT revenue could be decomposed using the following formula:
𝑉𝐴𝑇 𝐺𝑎𝑝
𝑉𝑅 = 𝑉𝑇𝑇𝐿 × 𝑉𝐴𝑇 𝑐𝑜𝑚𝑝𝑙𝑖𝑎𝑛𝑐𝑒 = 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 × 𝑏𝑎𝑠𝑒 × (1 − )
𝑉𝑇𝑇𝐿
Thus, the year-over-rear relative change in revenue is denoted as:
∆𝑉𝑅 ∆(𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒) ∆𝑏𝑎𝑠𝑒 ∆ (1 − 𝑉𝑇𝑇𝐿 )
= × × ⁄ 𝑉𝐴𝑇 𝐺𝑎𝑝
𝑉𝑅 𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑏𝑎𝑠𝑒 (1 − 𝑉𝑇𝑇𝐿 )
∆(𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒) ∆𝑏𝑎𝑠𝑒

where denotes change in effective rate, denotes change in base, and
𝑒𝑓𝑓𝑒𝑐𝑡𝑖𝑣𝑒 𝑟𝑎𝑡𝑒 𝑏𝑎𝑠𝑒
∆ (1 − )
𝑉𝑇𝑇𝐿 ⁄
𝑉𝐴𝑇 𝐺𝑎𝑝 denotes change in VAT compliance.
(1 − 𝑉𝑇𝑇𝐿 )
e. Data Sources and Estimation Method
The “top-down” method that is utilised for VAT Gap estimation relies on national accounts figures.
These figures are used to estimate the VAT liability generated by different sub-aggregates of the
total economy. The VTTL is estimated as the sum of the liability from six main components:
household, government, and NPISH final consumption; intermediate consumption; GFCF; and
other, largely country-specific, adjustments.
In the “top-down” approach, VTTL is estimated using the following formula:
𝑁
𝑉𝑇𝑇𝐿 = ∑(𝑟𝑎𝑡𝑒𝑖 × 𝑉𝑎𝑙𝑢𝑒𝑖 )

𝑖=1
𝑁
+ ∑(𝑟𝑎𝑡𝑒𝑖 × 𝑝𝑟𝑜𝑝𝑒𝑥𝑖 × 𝐼𝐶 𝑉𝑎𝑙𝑢𝑒𝑖 )

𝑖=1
𝑁
+ ∑(𝑟𝑎𝑡𝑒𝑖 × 𝑝𝑟𝑜𝑝𝑒𝑥𝑖 × 𝐺𝐹𝐶𝐹 𝑉𝑎𝑙𝑢𝑒𝑖 ) + 𝑛𝑒𝑡 𝑎𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡𝑠

𝑖=1
Where:
Rate is the weighted average tax rate i.e. the effective rate,
page 58 of 72
Value is the final consumption value,
IC Value is the value of intermediate consumption,
Propex is the percentage of output in a given sector that is exempt from VAT,
GFCF Value is the value of gross fixed capital formation, and
index i denotes sectors of the economy.
To summarise, VTTL is a product of the VAT rates and the propexes multiplied by the theoretical
values of consumption and investment (plus country specific net adjustments).
For the purpose of VAT Gap estimation, roughly 10,000 parameters are estimated for each year,
including the weighted average rates for each 2-digit CPA (i.e. 𝑟𝑎𝑡𝑒𝑖 in the VTTL formula presented
above) group of products and services and the percentage of output in a given sector that is
exempt from VAT for each type of consumption (i.e. 𝑝𝑟𝑜𝑝𝑒𝑥𝑖 in the VTTL formula presented
above). For instance, for Education services (CPA no. 85) in Croatia, like for any other country and
group of products and services, we estimated weighted average rates in household, government
and NPISH final consumption, as well as the percentage of output that is exempt from VAT. The
main source of information is national accounts data and Own Resource Submissions (ORS), i.e.
VAT statements provided by the Members States to the European Commission. In a number of
specific cases where the ORS information was insufficient, additional data provided by the
Member States was used. As these data are not official Eurostat publications, we decline
responsibility for inaccuracies related to their quality.
A complete description of data and sources is shown in Table A.2.
page 59 of 72
Table A.2. Data Sources
DESCRIPTION PURPOSE SOURCE COMMENT

Estimation of effective rates
Household expenditure by for household final
1 ORS / HBS11 …
CPA/COICOP category. consumption for each 2-digit
CPA category.
The intermediate
ORS /
consumption of industries
assumptions
for which VAT on inputs
common for
2 cannot be deducted, pro- Estimation of propexes. …
all EU
rata coefficients,
Member
alternatively share of
States
exempt output.
Investment (gross fixed
Estimation of VAT liability ORS / Values forecasted two years ahead
3 capital formation) of
from investment. Eurostat of available time series.
exempt sectors.
for government final
Government expenditure by
4 consumption for each 2-digit ORS …
CPA/COICOP category.
CPA category of products
and services.
NPISH expenditure by for NPISH final consumption
5 ORS …
CPA/COICOP category. for each 2-digit CPA category
of products and services.
VTTL adjustment due to
small business exemption,
In general, adjustments forecasted
business expenditure on Estimation of net
6 ORS two years ahead of available time
cars and fuel, and other adjustments.
series.
country-specific
adjustments.
As national accounts figures do not
always correspond to the tax base,
two corrections to the base are
applied: (1) adjustments for the self-
supply of food and agricultural
products and (2) adjustments for the
Final household
intermediate consumption of
consumption, government
construction work due to the
7 final consumption, NPISH Estimation of VTTL. Eurostat
treatment of construction activities
final consumption, and
abroad.
intermediate consumption.
If use tables are not available for a
particular year or available use
tables include confidential values,
use tables are imputed using the RAS
method.12
8 VAT revenue. VAT revenue. Eurostat …
11
Household Budget Survey, Eurostat.
12
RAS method (use the definition from above)
page 60 of 72
f. Derivation of the Policy Gap

In this section of Annex, we define the concepts used in Chapter IV and discuss some of the
methodological considerations.
We begin with the Notional Ideal Revenue that, by definition, should indicate an upper limit of
VAT revenue (i.e. the revenue levied at a uniform rate in the environment of perfect tax
compliance). As shown in Figure A1, ideal revenue is larger than VTTL and subsequently larger
than VAT collection. However, due to the existence of exemptions, it does not capture the entire
VTTL and tax collection. If no exemptions were applied, neither intermediate consumption nor the
GFCF of business sector would be the base for computing VTTL.
The problem arises when deciding whether investment by the non-business sector should be a
part of the VAT base. According to the OECD (2014), notional ideal revenue is defined as the
standard rate of VAT times the aggregate net final consumption. Multiplying the standard rate
and final consumption would yield, however, lower liability than in the case where a country
applied no exemptions, no reduced rates, and was able to enforce all tax payments. In real life,
VTTL is comprised partially from VAT liability from investment made by households, government,
and NPISH. In the case of the non-inclusion of this investment to the base, VTTL would be partially
extended beyond the ideal revenue despite “no exemptions” present in the system (see Figure A1
(c)).
Policy makers can see the upper limit of VAT revenue by considering all final use categories of
households, non-profit, and government sectors. Thus, in this report, Notional Ideal Revenue is
defined as the standard rate of VAT times the aggregate net final and net GFCF of the household,
non-profit, and government sectors, as recorded in the national accounts (interdependence
among the various concepts presented is shown in Figure A1).13
The Policy Gap is defined as one minus the ratio of the “legal” tax liability (i.e. the chunk of the
Notional Ideal Revenue that, in the counterfactual case of perfect tax compliance, is not collected
due to the presence of exemptions and reduced rates). The Policy Gap is denoted by the following
formula:
Policy Gap = (Notional Ideal Revenue – VTTL)/Notional Ideal Revenue
The Policy Gap could be further decomposed to account for the loss of revenue. Such components
are the Rate Gap and the Exemption Gap, which capture the loss in VAT liability due to the
application of reduced rates and the loss in liability due to the implementation of exemptions.
The Rate Gap is defined as the difference between the VTTL and what would be obtained in a
counterfactual situation, in which the standard rate, instead of the reduced, parking, and zero
rates, is applied to final consumption. Thus, the Rate Gap captures the loss in revenue that a
particular country incurs by adopting multiple VAT rates instead of a single standard rate (Barbone
et al., 2015).
13
National accounts for most countries report final consumption on a gross (i.e. VAT-inclusive) basis. Net
consumption is estimated on the basis of the gross consumption recorded in the use tables, from which VAT
revenues are subtracted.
page 61 of 72
The Exemption Gap is defined as the difference between the VTTL and what would be obtained in
a counterfactual situation, in which the standard rate is applied to exempt products and services,
and no restriction of the right to deduct applies.14 Thus, the Exemption Gap captures the amount
of revenue that might be lost because of exempted goods and services. Note that the Exemption
Gap is composed of the loss in the VAT on the value added of exempt sectors, minus the VAT on
their inputs, minus the VAT on GFCF inputs for these sectors. Thus, in principle, the Exemption
Gap might be positive or negative (if the particular sector had negative value added, or if it had
large GFCF expenditures relative to final consumption) (Barbone et al., 2015).
In algebraic terms, we have the following:
Definitions:
𝑉𝑇𝑇𝐿∗,𝐸
𝑇𝑖∗,𝐸 = 𝐶𝑖
𝑖
– effective rate for group i of products in the case where the standard rate instead
of the zero rate, parking rate, or reduced rate is applied (for final consumption and the GFCF of
non-business activities).
𝑉𝑇𝑇𝐿∗,𝐸
𝑖 – liability from final consumption GFCF of non-business activities of group i of products,
in the case of the standard rate instead of the zero rate, parking rate, or reduced rate is applied.
Actual liability from intermediate consumption and GFCF of business activities is assumed.
𝑉𝑇𝑇𝐿∗,𝑅
𝑇𝑖∗,𝑅 = 𝑖
– effective rate for group i of products in the event where exempt products within
𝐶𝑖
the group are taxed at the standard rate.
𝑉𝑇𝑇𝐿∗,𝑅
𝑖 – liability from final consumption of group i when exempt products within the group are
taxed at the standard rate. Actual liability from final consumption GFCF of non-business activities
is assumed.
𝜏𝑠 – statutory rate.
𝑖 ∈ (1; 65) – sectors of the economy.
Policy Gap:
∑𝑁𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁 ∗
𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁 ∗
𝑖=1 𝑇𝑖 𝐶𝑖
1−𝑃 =( )( 𝑁 )=( )
𝜏𝑠 ∑𝑁
𝑖=1 𝐶𝑖 ∑𝑖=1 𝑇𝑖 𝐶𝑖 𝜏𝑠 ∑𝑁𝑖=1 𝐶𝑖
14
The additive decomposition of the Policy Gap into the Exemption and Rate Gap presented in this report
differs from that in Keen (2013). Keen (2013) defines the Rate Gap as the loss from applying reduced and
zero rates to the final consumption liability, measured as a percentage of the Notional Ideal Revenue. The
Exemption Gap measures unrecovered VAT accumulated in the production process as a percentage, on the
contrary, of final consumption liability. Due to these definitions, the Policy Gap can be split multiplicatively
into gaps attributable to reduced rates and exemptions. Since the numerator of the “[1 - Rate Gap]” and
denominator of the “[1 - Exemption Gap]” are equal, multiplication of these two components yields – VAT
revenue as a percentage Notional Ideal Revenue, which equals “[1 - Policy Gap]” (Barbone et al., 2015).
page 62 of 72
Exemption Gap:
∗,𝐸 ∗,𝐸
∑𝑁𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁
𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁
1 − 𝑃𝐸 = ( )( 𝑁 )=( )
𝜏𝑠 ∑𝑁
Rate Gap:
∗,𝑅 ∗,𝑅
∑𝑁𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁
𝑖=1 𝑇𝑖 𝐶𝑖 ∑𝑁
1 − 𝑃𝑅 = ( )( 𝑁 )=( )
𝜏𝑠 ∑𝑁
By definition we have:
𝑁 𝑁 𝑁 𝑁
𝜏𝑠 ∑ 𝐶𝑖 = ∑ 𝑇𝑖∗ 𝐶𝑖 + (𝜏𝑠 ∑ 𝐶𝑖 − ∑ 𝑇𝑖∗ 𝐶𝑖 )

𝑖=1 𝑖=1 𝑖=1 𝑖=1
𝑁 𝑁 𝑁 𝑁 𝑁
∗,𝑅
= ∑ 𝑇𝑖∗ 𝐶𝑖 + (𝜏𝑠 ∑ 𝐶𝑖 − ∑ 𝑇𝑖 𝐶𝑖 ) + (𝜏𝑠 ∑ 𝐶𝑖 − ∑ 𝑇𝑖∗,𝐸 𝐶𝑖 )
𝑖=1 𝑖=1 𝑖=1 𝑖=1 𝑖=1
Thus:
∗,𝐸 ∗,𝑅
∑𝑁 ∗
𝑖=1 𝑇𝑖 𝐶𝑖 𝜏𝑠 ∑𝑁 𝑁 ∗
𝑖=1 𝐶𝑖 − ∑𝑖=1 𝑇𝑖 𝐶𝑖 2𝜏𝑠 ∑𝑁 𝑁 𝑁
𝑖=1 𝐶𝑖 − ∑𝑖=1 𝑇𝑖 𝐶𝑖 − ∑𝑖=1 𝑇𝑖 𝐶𝑖
𝑃 =1−( )=( )=( )
𝜏𝑠 ∑𝑁𝑖=1 𝐶𝑖 𝜏𝑠 ∑𝑁𝑖=1 𝐶𝑖 𝜏𝑠 ∑𝑁
𝑖=1 𝐶𝑖
= 𝑃𝑅 + 𝑃𝐸
Using the above convention, one can decompose the Rate Gap and the Exemption Gap into the
components indicating loss of the Notional Ideal Revenue due to the implementation of reduced
rates and exemptions on specific the goods and services. Such additive decomposition is carried
out for the computation of, as defined by Barbone et al. (2015), the Actionable Exempt Gap, which
excludes services and notional values that are unlikely to be taxed even in an ideal world.
page 63 of 72
Figure A1. Components of Ideal Revenue, VTTL, and VAT Collection
(a) (b) (c)
Source: own.
page 64 of 72
Annex B. Statistical Appendix
Table B1. VTTL (EUR million)

2011 2012 2013 2014 2015
Belgium 29604 31229 31057 30496 30869
Bulgaria 4506 4776 4660 4986 5111
Czech Republic 13567 14257 14432 13916 14826
Denmark 26501 27250 27474 27868 28562
Germany 210499 218025 221654 227979 233982
Estonia 1551 1719 1808 1874 1969
Ireland 11550 12099 11725 12628 13275
Greece 22677 19192 18751 16966 17964
Spain 64526 62761 68926 69400 71092
France 152667 162380 162708 170435 171735
Croatia . . . 5611 5921
Italy 139468 134560 133986 135376 136127
Cyprus . . . . 1639
Latvia 2032 2068 2213 2207 2287
Lithuania 3465 3638 3686 3816 3925
Luxembourg 3019 3301 3544 3823 3634
Hungary 10833 11585 11477 11757 12369
Malta 882 938 992 1063 883
Netherlands 46173 45971 47166 47050 48751
Austria 26189 26625 27624 28084 28589
Poland 37512 38013 37725 39032 39840
Portugal 16461 16581 16288 16914 17357
Romania 18193 17913 19133 20116 20599
Slovenia 3179 3165 3209 3411 3406
Slovakia 6570 6960 7048 7227 7677
Finland 18261 18919 19959 20159 20392
Sweden 37659 40094 39892 38956 39933
United Kingdom 143514 159037 158717 176193 204156
EU-26 (2011-
2013)
1051055 1083057 1095853 1137342 1186869
EU-27 (2014)
EU-27 (2015)
page 65 of 72
Table B2. Household VAT Liability (EUR million)

2011 2012 2013 2014 2015
Belgium 16666 17219 17576 17480 17870
Bulgaria 3363 3595 3399 3559 3655
Czech Republic 8475 9064 9303 8917 9292
Denmark 15216 15719 15992 16219 16635
Germany 134224 137795 139195 142349 146246
Estonia 1098 1202 1273 1322 1378
Ireland 7127 7405 7281 7520 7973
Greece 16125 14017 13498 12381 13199
Spain 44891 46291 50150 50979 52568
France 94180 96942 96958 101684 103383
Croatia . . . 4093 4205
Italy 99560 97624 95936 97871 99158
Cyprus . . . . 1034
Latvia 1555 1634 1679 1715 1770
Lithuania 2788 2941 3010 3132 3232
Luxembourg 1079 1131 1143 1181 1452
Hungary 7735 8234 8217 8178 8428
Malta 386 412 429 448 474
Netherlands 24285 24745 25882 25363 25952
Austria 17767 18307 18995 19305 19470
Poland 24769 25966 26146 26935 27400
Portugal 11432 12371 12239 12818 13112
Romania 11029 11014 11227 12159 12384
Slovenia 2271 2285 2284 2412 2411
Slovakia 4873 5029 5101 5239 5357
Finland 10154 10513 11041 11074 11323
Sweden 20053 21307 21117 20681 20881
United Kingdom 94913 105038 104451 116687 136957
EU-26 (2011-
2013)
676013 697797 703522 731701 767200
EU-27 (2014)
EU-27 (2015)
page 66 of 72
Table B3. Intermediate Consumption and Government VAT Liability (EUR million)
2011 2012 2013 2014 2015
Belgium 7435 7599 7697 7364 7538
Bulgaria 622 644 687 787 748
Czech Republic 3480 3402 3439 3254 3463
Denmark 7354 7673 7575 7671 7837
Germany 42634 43608 44992 46738 47634
Estonia 224 235 249 257 267
Ireland 2967 3461 3253 3666 3669
Greece 2877 2704 2304 2030 2243
Spain 10922 10526 11026 10753 10778
France 25902 27140 27655 28681 29076
Croatia . . . 936 1113
Italy 20279 19815 20378 20548 20463
Cyprus . . . . 443
Latvia 346 343 360 370 388
Lithuania 415 445 407 443 445
Luxembourg 593 606 642 722 938
Hungary 1924 1948 1860 1940 2035
Malta 458 479 511 559 336
Netherlands 12669 12916 13565 13677 13902
Austria 4404 4544 4646 4907 5077
Poland 7035 7118 6933 7344 7700
Portugal 3037 2870 2826 2868 2937
Romania 2787 2860 2755 3189 3096
Slovenia 472 471 490 508 518
Slovakia 1071 1166 1211 1258 1343
Finland 4262 4358 4749 4899 4921
Sweden 10764 11489 11592 11004 11493
United Kingdom 36720 38583 37160 40181 46754
EU-26 (2011-
2013)
211652 217004 218960 226554 237154
EU-27 (2014)
EU-27 (2015)
page 67 of 72
Table B4. GFCF VAT Liability (EUR million)

2011 2012 2013 2014 2015
Belgium 4007 4895 4725 4992 5088
Bulgaria 463 478 521 595 662
Czech Republic 1574 1783 1690 1768 2083
Denmark 3292 3178 3179 3276 3369
Germany 32277 35350 36084 37575 38792
Estonia 220 272 278 285 315
Ireland 1304 1079 1031 1289 1468
Greece 3307 2220 2682 2312 2256
Spain 8463 5632 7353 7241 7279
France 28103 33496 33133 34634 33988
Croatia . . . 562 530
Italy 15035 12770 13564 13212 13370
Cyprus . . . . 141
Latvia 196 194 278 238 246
Lithuania 372 378 398 415 454
Luxembourg 305 317 306 319 382
Hungary 1074 1169 1222 1475 1753
Malta 37 45 50 55 71
Netherlands 8750 7824 7205 7502 8389
Austria 2477 2296 2545 2562 2621
Poland 4738 3924 3647 4048 4188
Portugal 1665 981 887 894 955
Romania 3718 3387 4740 4110 4480
Slovenia 322 303 334 403 399
Slovakia 607 745 725 751 994
Finland 3295 3570 3622 3583 3537
Sweden 6055 6407 6562 6619 6889
United Kingdom 9884 12662 13466 16519 18757
EU-26 (2011-
2013)
141539 145354 150226 157235 163454
EU-27 (2014)
EU-27 (2015)
page 68 of 72
Table B5. VAT Revenues (EUR million)

2011 2012 2013 2014 2015
Belgium 25979 26844 27250 27518 27547
Bulgaria 3362 3769 3898 3810 4059
Czech Republic 11246 11377 11694 11602 12382
Denmark 23682 24399 24320 24950 25470
Germany 189910 194034 197005 203081 211616
Estonia 1363 1508 1558 1711 1873
Ireland 9755 10219 10372 11521 11955
Greece 15021 13713 12593 12676 12885
Spain 55904 56652 60951 63643 68589
France 140552 142527 144490 148454 151622
Croatia . . . 5368 5689
Italy 98650 96170 93921 97071 101034
Cyprus . . . . 1517
Latvia 1374 1570 1690 1787 1876
Lithuania 2444 2521 2611 2764 2888
Luxembourg 2879 3164 3429 3732 3432
Hungary 8516 9084 9073 9754 10669
Malta 520 540 582 642 684
Netherlands 41610 41699 42424 42708 44879
Austria 23394 24507 24895 25386 26232
Poland 29764 27783 27780 29317 30075
Portugal 14265 13995 13710 14682 15368
Romania 11412 11003 11710 11496 12939
Slovenia 2995 2888 3046 3155 3219
Slovakia 4711 4328 4696 5021 5420
Finland 17315 17987 18888 18948 18974
Sweden 36631 37834 39048 38846 40501
United Kingdom 130818 143405 142223 157478 181945
EU-26 (2011-
2013)
906082 925531 935869 979135 1037354
EU-27 (2014)
EU-27 (2015)
Source: Eurostat.
page 69 of 72
Table B6. VAT Gap (EUR million)

2011 2012 2013 2014 2015
Belgium 3625 4385 3807 2978 3323
Bulgaria 1144 1007 762 1176 1052
Czech Republic 2321 2880 2737 2313 2444
Denmark 2818 2851 3153 2919 3092
Germany 20589 23991 24649 24898 22366
Estonia 188 211 250 163 96
Ireland 1795 1880 1353 1106 1319
Greece 7656 5479 6158 4290 5079
Spain 8622 6109 7975 5757 2503
France 12115 19853 18218 21981 20113
Croatia . . . 243 232
Italy 40818 38390 40065 38305 35093
Cyprus . . . . 122
Latvia 658 498 523 420 411
Lithuania 1021 1117 1075 1052 1037
Luxembourg 140 137 115 90 202
Hungary 2317 2501 2403 2003 1700
Malta 362 398 410 421 199
Netherlands 4563 4272 4742 4342 3872
Austria 2795 2118 2730 2699 2357
Poland 7747 10229 9945 9715 9765
Portugal 2196 2586 2578 2232 1989
Romania 6782 6910 7423 8620 7659
Slovenia 184 277 164 256 188
Slovakia 1859 2632 2352 2206 2256
Finland 946 932 1071 1211 1418
Sweden 1028 2260 844 110 -568
United Kingdom 12696 15632 16494 18715 22210
EU-26 (2011-
2013)
146983 159538 161997 160220 151530
EU-27 (2014)
EU-27 (2015)
page 70 of 72
Table B7. VAT Gap (percent of VTTL)

2011 2012 2013 2014 2015
Belgium 12.25 14.04 12.26 9.77 10.76
Bulgaria 25.39 21.09 16.35 23.58 20.58
Czech Republic 17.11 20.20 18.97 16.62 16.48
Denmark 10.63 10.46 11.48 10.47 10.83
Germany 9.78 11.00 11.12 10.92 9.56
Estonia 12.15 12.28 13.84 8.70 4.88
Ireland 15.54 15.54 11.54 8.76 9.94
Greece 33.76 28.55 32.84 25.29 28.27
Spain 13.36 9.73 11.57 8.30 3.52
France 7.94 12.23 11.20 12.90 11.71
Croatia . . . 4.33 3.92
Italy 29.27 28.53 29.90 28.30 25.78
Cyprus . . . . 7.47
Latvia 32.38 24.07 23.63 19.01 17.97
Lithuania 29.47 30.71 29.16 27.57 26.41
Luxembourg 4.63 4.16 3.24 2.36 5.56
Hungary 21.39 21.59 20.94 17.04 13.74
Malta 41.02 42.40 41.34 39.59 22.57
Netherlands 9.88 9.29 10.05 9.23 7.94
Austria 10.67 7.96 9.88 9.61 8.24
Poland 20.65 26.91 26.36 24.89 24.51
Portugal 13.34 15.60 15.83 13.20 11.46
Romania 37.28 38.58 38.80 42.85 37.18
Slovenia 5.78 8.77 5.10 7.50 5.52
Slovakia 28.29 37.82 33.37 30.52 29.39
Finland 5.18 4.93 5.37 6.01 6.95
Sweden 2.73 5.64 2.12 0.28 -1.42
United Kingdom 8.85 9.83 10.39 10.62 10.88
EU-26 (2011-
2013)
13.98 14.73 14.78 14.09 12.77
EU-27 (2014)
EU-27 (2015)
page 71 of 72
References
Barbone, L., Belkindas, M., Bettendorf L., Bird R., Bonch-Osmolovskiy, M., Smart, M. (2013),
Study to quantify and analyse the VAT Gap in the EU-27 Member States, Final Report of project
TAXUD/2012/DE/316.
Barbone, L., Bonch-Osmolovskiy, M., Poniatowski, G. (2014), 2012 Update Report to the Study
to quantify and analyse the VAT Gap in the EU-27 Member States, Report of project
TAXUD/2013/DE/321
Barbone, L., Bonch-Osmolovskiy, M., Poniatowski, G. (2015), 2013 Update Report to the Study
to quantify and analyse the VAT Gap in the EU Member States, Report of project
TAXUD/2013/DE/321.
Poniatowski, G., Bonch-Osmolovskiy, M., Belkindas, M. (2016), 2014 Update Report to the Study
to quantify and analyse the VAT Gap in the EU Member States, Report of project
TAXUD/2015/CC/131.
Poniatowski, G., Neneman J., Michalik, T. (2015), VAT non-compliance in Poland under scrutiny,
mBank – CASE Seminar Proceedings No. 142/2016.
EC (2016), The Concept of Tax Gaps, Report on VAT Gap Estimations by FISCALIS Tax Gap Project
Group (FPG/041), European Commission, Directorate-General Taxation and Customs Union.
Keen, M. (2013), The Anatomy of the VAT, IMF Working Paper, WP/13/111, May.
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Study and Reports on the VAT Gap in the EU-28 Member States:

2017 Final Report

Client: Directorate General Taxation and Customs Union

CASE – Center for Social and Economic Research (Project leader)

Institute for Advanced Studies (Consortium leader)

Warsaw, 18 September 2017

IHS, Institute for Advanced Studies

List of Acronyms and Abbreviations ................................................................................................. 7

List of Acronyms and Abbreviations

CASE Center for Social and Economic Research (Warsaw)

I. Background: Economic and Policy Context in 2015

a. Economic Conditions in the EU during 2015

Table 1.1. Real and Nominal Growth in the EU-28 in 2015

Nominal Growth (%)

Belgium 1.5 2.4 1.2 2.9 0.9

b. VAT Regime Changes

Standard Reduced Super Parking Changes Weighted

c. Sources of Change in VAT Revenue Components

Table 1.3. Change in VAT Revenue Components (2015 over 2014)

Belgium -0.1 -1.1 1.3 0.1

Figure 1.1. Change in VAT Revenue Components (2015 over 2014)

change in effective rate change in VAT compliance change in base

Source: own calculations.

II. The VAT Gap in 2015

2015 2014 median

Source: own calculations.

Source: own calculations.

2014 2015 VAT

household final 16666 17219 17576 17480 17870 10000 5%

o/w liability on Highlights

VAT GAP 3625 4385 3807 2978 3323

VAT GAP as a percent

VAT GAP change since

Bulgaria 2011 2012 2013 2014 2015 12000 30%

o/w liability on Highlights

VAT GAP as a percent

VAT GAP change since -4 pp

Czech Republic 2011 2012 2013 2014 2015 500000 30%

400000 20% 19% 25%

o/w liability on Highlights

VAT GAP change since

Denmark 2011 2012 2013 2014 2015 250000 20%

VTTL 197446 202841 204895 207753 213038 200000

o/w liability on Highlights

VAT GAP 20998 21223 23517 21759 23064

VAT GAP as a percent

VAT GAP change since

Germany 2011 2012 2013 2014 2015 250000 20%

VTTL 210499 218025 221654 227979 233982 200000

o/w liability on Highlights

VAT GAP change since

Estonia 2011 2012 2013 2014 2015 2500 20%

VTTL 1551 1719 1808 1874 1969 2000 14%

o/w liability on Highlights

VAT GAP change

Ireland 2011 2012 2013 2014 2015 14000 20%

o/w liability on Highlights

VAT GAP change

Greece 2011 2012 2013 2014 2015