Brussels – EU member states lost almost 150 billion euros (177 billion dollars) in value-added tax (VAT) revenues in 2016, with a third of that estimated to be due to fraud, the European Commission announced.
VAT is a consumption tax charged on most goods and services and is an important contribution to national budgets, helping to fund domestic public services as well as feeding into the EU’s spending pot.
“[A] loss of 150 billion euros per year for national budgets remains unacceptable, especially when 50 billion euros of this is lining the pockets of criminals, fraudsters and probably even terrorists,” EU Economy Commissioner Pierre Moscovici said in a statement.
The so-called VAT gap is calculated by comparing a country’s expected VAT revenue with the amount actually collected in a given year.
Tax collection improved by an average 1.1 per cent across the EU in 2016, bringing in an additional 10.5 billion euros, the commission calculated.
The figures differ widely between member states, however, ranging from a VAT gap of 0.85 per cent in Luxembourg to 35.9 per cent in Romania.
Besides fraud, other reasons why governments may lose out on VAT revenues include tax avoidance and evasion, bankruptcies and miscalculations.
The commission urged member states to adopt a series of VAT reforms it proposed last year, aimed at improving collection rates. It called on governments to approve the revisions ahead of next year’s European Parliament elections in May.