While VAT revenue collection has failed to show significant improvement across EU member states — 15 of them including Latvia, Malta and Slovakia saw an improvement in their figures and 11 such as Estonia and Poland saw deterioration — Slovenia leads the countries of Emerging Europe with only a 5.8 per cent VAT gap, compared to 15.2% of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies and miscalculation across the EU. Not only is Slovenia’s VAT gap the lowest in the region but in 2013 the country improved its VAT collection by 3.3 percentage points says a recent CASE report commissioned by the Directorate General for Taxation and Customs Union (TAXUD) of the European Commission.
Out of 10 EU member states from the Emerging Europe region, five countries improved their VAT collection: the Czech Republic, Bulgaria, Slovakia, Slovenia and Latvia (the highest increase of VAT collection in the region — 3.9 percentage points). In five countries, including Estonia, Hungary, Lithuania, Poland and Romania, VAT collection worsened.
“The overall underperformance was due to unfavourable economic environment, as the GDP of the European Union in 2013 was nearly stagnant. An increase in VAT gap in 2013 can also be explained by the increasing phenomenon of ‘missing trader frauds’ and carousel frauds,” says Grzegorz Poniatowski, Senior Economist at CASE, one of the report’s authors.
In 2013, the estimated VAT gaps was the highest in Latvia (37.7 per cent), Slovakia (34.9 per cent), Lithuania (37.7 per cent) and in Romania (41.1 per cent).
“This important study highlights once again the need for further reform in VAT collection systems across the EU. I urge Member States to take the steps needed to fight tax evasion and tax fraud at all levels. This remains a burning issue and is at the top of this Commission’s agenda,” says Pierre Moscovici, EU Commissioner for Economic and Financial Affairs, Taxation and Customs.