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Two VAT gap indicators are analysed:
The VAT compliance gap is the estimated difference between potential VAT revenue under full compliance and the actual amount collected by tax authorities.
The VAT policy gap represents an estimate of the VAT revenues forgone due to the application of reduced VAT rates and exemptions, compared to a single, flat statutory VAT rate.
It is important to monitor the VAT gap indicators since:
- VAT contributes to both national and EU budgets.
- Estimates of the VAT compliance gap are sometimes used as an indicator for the effectiveness of VAT collection.
- Lost VAT revenues have a negative impact on government spending on public goods and services such as schools, hospitals, and transport.
- Studies on the scale of the VAT compliance gap help the Commission develop well-targeted measures to improve VAT compliance.
Variations between EU countries in the estimated VAT compliance gap can point to differences among Member States in terms of tax compliance, fraud, avoidance, bankruptcies, insolvencies, and the performance of tax administrations.
VAT gap in Europe – report 2025
The 2025 report offers fresh VAT compliance gap estimates, a more detailed breakdown of the VAT policy gap, and, for the first time: coverage of EU candidate countries. The report adds new case studies, clearer methodological explanations, and updated past estimates, providing the most comprehensive overview yet of VAT performance across Europe.
The main results for the VAT compliance gap, the development of the VAT compliance gap between 2019 and 2023, and the actionable VAT policy gap can be viewed for each Member State in separate maps below.
VAT compliance gap
The VAT compliance gap represents the difference between the revenue that would be collected if all taxpayers were compliant with the tax rules and the actual revenue. This difference encompasses a wide range of sources of forgone receipts, from the legal exploitation of loopholes in tax systems to evasion or organized large-scale tax fraud. Non-compliance can also be unintentional, resulting from administrative errors, omissions, non-fraudulent bankruptcies, and other factors.
The VAT compliance gap in 2023 in the EU Member States, EU candidate countries, and potential candidates, is shown in the map below.
Development of VAT compliance gap between 2019 and 2023
The VAT compliance gap has decreased between 2019 and 2023 in most EU Member States. In the EU, the VAT compliance gap in 2023 amounted to 9.5% of the VAT Total Tax Liability (VTTL). Compared to 2019, the VAT compliance gap decreased by 1.6 percentage points. The development of the VAT compliance gap in EU Member States, EU candidate countries, and potential candidates between 2019 and 2023 is shown in the map below.
VAT policy gap
The VAT policy gap analysis presented in VAT gap in Europe - report 2025 has undergone substantial revisions compared to previous studies. The new breakdown distinguishes between elements that fall under the discretion of national administrations and those required by EU law. The actionable VAT policy gap refers to revenue foregone due to reduced rates and exemptions that could, in principle, be lifted. It consists of the VAT rate gap, the national policy-driven VAT exemption gap, and the EU policy-mandated VAT exemption gap. Beyond this breakdown, the report further decomposes the VAT policy gap to attribute forgone revenue to specific types of goods and services and sectors of economic activity. The actionable VAT policy gap in 2023 is shown in the map below.
At this stage, estimates of the actionable VAT policy gap and its components are displayed only for EU Member States.
VAT rate gap
VAT rate gap is the theoretical VAT revenue loss due to the application of reduced VAT rates.
National policy-driven VAT exemption gap
The national policy-driven VAT exemption gap includes exemptions under the discretion of Member State administrations. It consists of revenue forgone from services falling under Article 137 (such as real estate and certain financial services), from the SME scheme, and from national exemptions applied under standstill clauses or derogations.
EU policy-mandated VAT exemption gap
The EU policy-mandated VAT exemption gap includes exemptions required under EU law where Member States have limited discretion. These include services and activities in the public interest under Article 132, such as education, healthcare, postal services, welfare, cultural activities, and sport, as well as insurance services and gambling and betting under Article 135.
Detailed results per selected region
You can find the main results for the EU, Member States, and EU candidate countries and potential candidates on this website. For more details on the results, methodology, and case studies please download the full report or the executive summary. The main results are summarised in the infographic.
European Union
In 2023, total VAT revenue amounted to €1 223 billion in the EU. The VAT compliance gap was estimated at €128 billion or 9.5% of the VAT total tax liability (VTTL), an increase of 1.6 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 11.1% to 9.5%. The development in between is displayed in the figure below. The total VAT policy gap was 50.5% of the notional ideal revenue in 2023 - an increase of 0.6 percentage points compared to 2022. Between 2019 and 2023, the VAT policy gap increased slightly from 49.4% to 50.5%. About 12.3% of the 2023 notional ideal revenue loss can be attributed to the application of reduced, super-reduced, and zero (i.e., exemption with the right to deduct) VAT rates. The VAT exemption gap, representing revenue forgone due to exemptions without the right to deduct input tax and certain components of household final consumption excluded from the VAT base, accounted for roughly 38.3% of the notional ideal revenue. Of the latter component, the main source of revenue loss was the non-actionable part (23.3% on the notional ideal revenue). The national policy-driven VAT exemption gap stood at 11.4%, which was slightly below the VAT rate gap. The EU policy-mandated VAT exemption gap was estimated at 3.6% of the notional ideal revenue in 2023.
Austria
In 2023, Austria collected a total of €37 891 million in VAT revenue. The VAT compliance gap was estimated at €392 million, equivalent to 1.0% of the VAT Total Tax Liability (VTTL), representing a decrease of 2.0 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 6.8% to 1.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Austria is ranked 1st among the EU Member States. The actionable VAT policy gap stood at 25.8% in 2023, consisting of a VAT rate gap of 17.7%, a national policy-driven VAT exemption gap of 5.3%, and an EU policy-mandated VAT exemption gap of 2.9%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
Belgium
In 2023, Belgium collected a total of €37 413 million in VAT revenue. The VAT compliance gap was estimated at €5 230 million, equivalent to 12.3% of the VAT Total Tax Liability (VTTL), representing an increase of 0.6 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 13.2% to 12.3% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Belgium is ranked 21st among the EU Member States. The actionable VAT policy gap stood at 27.6% in 2023, consisting of a VAT rate gap of 13.1%, a national policy-driven VAT exemption gap of 9.5%, and an EU policy-mandated VAT exemption gap of 5.0%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Bulgaria collected a total of €8 324 million in VAT revenue. The VAT compliance gap was estimated at €781 million, equivalent to 8.6% of the VAT Total Tax Liability (VTTL), representing an increase of 2.3 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 9.3% to 8.6% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Bulgaria is ranked 15th among the EU Member States. The actionable VAT policy gap stood at 11.1% in 2023, consisting of a VAT rate gap of 4.2%, a national policy-driven VAT exemption gap of 5.8%, and an EU policy-mandated VAT exemption gap of 1.2%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Croatia collected a total of €10 492 million in VAT revenue. The VAT compliance gap was estimated at €875 million, equivalent to 7.7% of the VAT Total Tax Liability (VTTL), representing a decrease of 3.7 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased from 4.0% to 7.7% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Croatia is ranked 12th among the EU Member States. The actionable VAT policy gap stood at 22.8% in 2023, consisting of a VAT rate gap of 15.4%, a national policy-driven VAT exemption gap of 5.6%, and an EU policy-mandated VAT exemption gap of 1.8%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Cyprus collected a total of €2 979 million in VAT revenue. The VAT compliance gap was estimated at €101 million, equivalent to 3.3% of the VAT Total Tax Liability (VTTL), representing a decrease of 3.0 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 11.0% to 3.3% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Cyprus is ranked 3rd among the EU Member States. The actionable VAT policy gap stood at 23.6% in 2023, consisting of a VAT rate gap of 14.8%, a national policy-driven VAT exemption gap of 4.9%, and an EU policy-mandated VAT exemption gap of 3.9%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Czechia collected a total of €23 859 million in VAT revenue. The VAT compliance gap was estimated at €2 087 million, equivalent to 8.0% of the VAT Total Tax Liability (VTTL), representing a decrease of 0.2 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 14.6% to 8.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Czechia is ranked 13th among the EU Member States. The actionable VAT policy gap stood at 18.4% in 2023, consisting of a VAT rate gap of 7.3%, a national policy-driven VAT exemption gap of 8.6%, and an EU policy-mandated VAT exemption gap of 2.5%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Denmark collected a total of €34 120 million in VAT revenue. The VAT compliance gap was estimated at €3 314 million, equivalent to 8.9% of the VAT Total Tax Liability (VTTL), representing an increase of 0.9 percentage point compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 11.2% to 8.9% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Denmark is ranked 16th among the EU Member States. The actionable VAT policy gap stood at 12.2% in 2023, consisting of a VAT rate gap of 0.7%, a national policy-driven VAT exemption gap of 8.6%, and an EU policy-mandated VAT exemption gap of 3.0%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Estonia collected a total of €3 476 million in VAT revenue. The VAT compliance gap was estimated at €398 million, equivalent to 10.3% of the VAT Total Tax Liability (VTTL), representing an increase of 5.1 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased from 5.9% to 10.3% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Estonia is ranked 18th among the EU Member States. The actionable VAT policy gap stood at 15.2% in 2023, consisting of a VAT rate gap of 2.5%, a national policy-driven VAT exemption gap of 10.4%, and an EU policy-mandated VAT exemption gap of 2.3%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Finland collected a total of €25 087 million in VAT revenue. The VAT compliance gap was estimated at €777 million, equivalent to 3.0% of the VAT Total Tax Liability (VTTL), representing an increase of 0.9 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 4.7% to 3.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Finland is ranked 2nd among the EU Member States. The actionable VAT policy gap stood at 20.4% in 2023, consisting of a VAT rate gap of 8.7%, a national policy-driven VAT exemption gap of 8.1%, and an EU policy-mandated VAT exemption gap of 3.6%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, France collected a total of €206 049 million in VAT revenue. The VAT compliance gap was estimated at €12 121 million, equivalent to 5.6% of the VAT Total Tax Liability (VTTL), representing an increase of 0.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 6.8% to 5.6% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, France is ranked 8th among the EU Member States. The actionable VAT policy gap stood at 26.7% in 2023, consisting of a VAT rate gap of12.1%, a national policy-driven VAT exemption gap of 10.4%, and an EU policy-mandated VAT exemption gap of 4.2%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Germany collected a total of €289 965 million in VAT revenue. The VAT compliance gap was estimated at €31 295 million, equivalent to 9.7% of the VAT Total Tax Liability (VTTL), representing an increase of 3.1 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 10.5% to 9.7% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Germany is ranked 17th among the EU Member States. The actionable VAT policy gap stood at 24.0% in 2023, consisting of a VAT rate gap of 8.3%, a national policy-driven VAT exemption gap of 11.7%, and an EU policy-mandated VAT exemption gap of 3.9%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Greece collected a total of €19 756 million in VAT revenue. The VAT compliance gap was estimated at €2 532 million, equivalent to 11.4% of the VAT Total Tax Liability (VTTL), representing a decrease of 1.1 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 24.0% to 11.4% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Greece is ranked 20th among the EU Member States. The actionable VAT policy gap stood at 36.1% in 2023, consisting of a VAT rate gap of 18.3%, a national policy-driven VAT exemption gap of 14.4%, and an EU policy-mandated VAT exemption gap of 3.4%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Hungary collected a total of €18 474 million in VAT revenue. The VAT compliance gap was estimated at €1 484 million, equivalent to 7.4% of the VAT Total Tax Liability (VTTL), representing an increase of 5.0 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 10.4% to 7.4% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Hungary is ranked 10th among the EU Member States. The actionable VAT policy gap stood at 23.5% in 2023, consisting of a VAT rate gap of 8.6%, a national policy-driven VAT exemption gap of 12.7%, and an EU policy-mandated VAT exemption gap of 2.3%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Ireland collected a total of €20 195 million in VAT revenue. The VAT compliance gap was estimated at €1 832 million, equivalent to 8.3% of the VAT Total Tax Liability (VTTL), representing an increase of 6.0 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased from 5.5% to 8.3% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Ireland is ranked 14th among the EU Member States. The actionable VAT policy gap stood at 28.9% in 2023, consisting of a VAT rate gap of 18.2%, a national policy-driven VAT exemption gap of 7.2%, and an EU policy-mandated VAT exemption gap of 3.4%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Italy collected a total of €141 199 million in VAT revenue. The VAT compliance gap was estimated at €25 012 million, equivalent to 15.0% of the VAT Total Tax Liability (VTTL), representing an increase of 0.6 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 19.3% to 15.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Italy is ranked 22nd among the EU Member States. The actionable VAT policy gap stood at 32.1% in 2023, consisting of a VAT rate gap of 17.1%, a national policy-driven VAT exemption gap of 11.7%, and an EU policy-mandated VAT exemption gap of 3.4%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Latvia collected a total of €3 851 million in VAT revenue. The VAT compliance gap was estimated at €220 million, equivalent to 5.4% of the VAT Total Tax Liability (VTTL), representing an increase of 3.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 10.1% to 5.4% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Latvia is ranked 7th among the EU Member States. The actionable VAT policy gap stood at 15.3% in 2023, consisting of a VAT rate gap of 3.8%, a national policy-driven VAT exemption gap of 7.3%, and an EU policy-mandated VAT exemption gap of 4.2%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Lithuania collected a total of €5 911 million in VAT revenue. The VAT compliance gap was estimated at €1 048 million, equivalent to 15.1% of the VAT Total Tax Liability (VTTL), representing an increase of 2.9 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 20.9% to 15.1% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Lithuania is ranked 23rd among the EU Member States. The actionable VAT policy gap stood at 17.7% in 2023, consisting of a VAT rate gap of 6.4%, a national policy-driven VAT exemption gap of 8.0%, and an EU policy-mandated VAT exemption gap of 3.3%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
The estimates of Luxembourg’s VAT compliance gap fall outside plausible ranges. They show negative or near-zero values for several consecutive years, which is not feasible in practice as it implies that collected VAT exceeds theoretical liability. This particularly low VAT compliance gap was estimated following a major upward revision of Luxembourg’s VAT revenue data of up to 8.5% of revenues for recent years. Further research and discussions with the national authorities will be necessary in the future to reconcile VAT revenue and national accounts data in Luxembourg.
In 2023, Malta collected a total of €1 269 million in VAT revenue. The VAT compliance gap was estimated at €405 million, equivalent to 24.2% of the VAT Total Tax Liability (VTTL), representing an increase of 0.6 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 26.0% to 24.2% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Malta is ranked 25th among the EU Member States. The actionable VAT policy gap stood at 22.7% in 2023, consisting of a VAT rate gap of 14.8%, a national policy-driven VAT exemption gap of 14.5%, and an EU policy-mandated VAT exemption gap of -6.6%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, the Netherlands collected a total of €75 920 million in VAT revenue. The VAT compliance gap was estimated at €5 725 million, equivalent to 7.0% of the VAT Total Tax Liability (VTTL), representing a decrease of 2.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 11.2% to 7.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, the Netherlands is ranked 9th among the EU Member States. The actionable VAT policy gap stood at 21.1% in 2023, consisting of a VAT rate gap of 9.8%, a national policy-driven VAT exemption gap of 7.4%, and an EU policy-mandated VAT exemption gap of 3.9%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Poland collected a total of €54 999 million in VAT revenue. The VAT compliance gap was estimated at €10 453 million, equivalent to 16.0% of the VAT Total Tax Liability (VTTL), representing an increase of 4.8 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased from 14.9% to 16.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Poland is ranked 24th among the EU Member States. The actionable VAT policy gap stood at 36.8% in 2023, consisting of a VAT rate gap of 18.6%, a national policy-driven VAT exemption gap of 16.1%, and an EU policy-mandated VAT exemption gap of 2.1%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Portugal collected a total of €24 086 million in VAT revenue. The VAT compliance gap was estimated at €900 million, equivalent to 3.6% of the VAT Total Tax Liability (VTTL), representing a decrease of 0.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 7.9% to 3.6% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Portugal is ranked 4th among the EU Member States. The actionable VAT policy gap stood at 31.5% in 2023, consisting of a VAT rate gap of 14.2%, a national policy-driven VAT exemption gap of 11.8%, and an EU policy-mandated VAT exemption gap of 5.6%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Romania collected a total of €21 449 million in VAT revenue. The VAT compliance gap was estimated at €9 201 million, equivalent to 30.0% of the VAT Total Tax Liability (VTTL), representing an increase of 3.4 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 30.9% to 30.0% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Romania is ranked last among the EU Member States. The actionable VAT policy gap stood at 24.7% in 2023, consisting of a VAT rate gap of 10.6%, a national policy-driven VAT exemption gap of 11.8%, and an EU policy-mandated VAT exemption gap of 2.2%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Slovakia collected a total of €9 272 million in VAT revenue. The VAT compliance gap was estimated at €1 087 million, equivalent to 10.5% of the VAT Total Tax Liability (VTTL), representing a decrease of 1.0 percentage point compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 16.5% to 10.5% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Slovakia is ranked 19th among the EU Member States. The actionable VAT policy gap stood at 19.7% in 2023, consisting of a VAT rate gap of 7.1%, a national policy-driven VAT exemption gap of 7.8%, and an EU policy-mandated VAT exemption gap of 4.7%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Slovenia collected a total of €5 150 million in VAT revenue. The VAT compliance gap was estimated at €264 million, equivalent to 4.9% of the VAT Total Tax Liability (VTTL), representing a decrease of 3.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased slightly from 4.8% to 4.9% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Slovenia is ranked 5th among the EU Member States. The actionable VAT policy gap stood at 28.8% in 2023, consisting of a VAT rate gap of 12.2%, a national policy-driven VAT exemption gap of 13.3%, and an EU policy-mandated VAT exemption gap of 3.3%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Spain collected a total of €93 825 million in VAT revenue. The VAT compliance gap was estimated at €7 771 million, equivalent to 7.6% of the VAT Total Tax Liability (VTTL), representing an increase of 3.5 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 7.8% to 7.6% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Spain is ranked 11th among the EU Member States. The actionable VAT policy gap stood at 38.3% in 2023, consisting of a VAT rate gap of 16.5%, a national policy-driven VAT exemption gap of 18.7%, and an EU policy-mandated VAT exemption gap of 3.1%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
In 2023, Sweden collected a total of €48 132 million in VAT revenue. The VAT compliance gap was estimated at €2 712 million, equivalent to 5.3% of the VAT Total Tax Liability (VTTL), representing an increase of 1.8 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap increased from 1.5% to 5.3% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Sweden is ranked 6th among the EU Member States. The actionable VAT policy gap stood at 20.6% in 2023, consisting of a VAT rate gap of 8.2%, a national policy-driven VAT exemption gap of 9.9%, and an EU policy-mandated VAT exemption gap of 2.6%. For context: if no product or service was exempt from VAT and no reduced VAT rates were applied, the actionable VAT policy gap would be 0%.
Explore regions - estimates for EU candidate countries and potential candidates
The VAT compliance gap estimates for EU candidate countries and potential candidates with sufficiently reliable data fell within the range observed for EU Member States. In 2023, the estimated VAT compliance gap was 5.4% in Georgia, 8.1% in Kosovo, and 24.6% in Albania. For Ukraine, the available estimate, derived only for the period before Russia’s full-scale aggression, amounted to 17.5% in 2021.
Regarding the VAT policy gap, the estimates for EU candidate countries and potential candidates show substantial divergence from those for EU Member States, with some, such as Kosovo, recording a VAT policy gap as low as 16.5%. In 2023, the estimated VAT policy gap was 25.4% in Georgia, 27.5% in Albania, and 20.5% in Ukraine*. This suggests that the VAT policy gap stands for a relatively smaller forgone revenue in these countries compared to the losses from VAT non-compliance. Contributing factors include a generally more limited use of reduced VAT rates and exemptions, as well as differences in economic structure – specifically, lower consumption of goods and services provided by non-taxable and exempt sectors. To a large extent, the latter includes non-actionable components of household final consumption such as public services and imputed rents.
*Note: The estimates available for Ukraine refer to 2021.
Albania
In 2023, Albania collected a total of €1768 million in VAT revenue. The VAT compliance gap was estimated at €578 million, equivalent to 24.6% of the VAT Total Tax Liability (VTTL), representing an increase of 4.1 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 32.7% to 24.6% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Albania is ranked above that level. The VAT policy gap stood at 27.5% in 2023, consisting of a VAT rate gap of 1.1%, and a VAT exemption gap of 26.4%.
In 2023, Georgia collected a total of €2 967 million in VAT revenue. The VAT compliance gap was estimated at €169 million, equivalent to 5.4% of the VAT Total Tax Liability (VTTL), remaining unchanged compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 9.2% to 5.4% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Georgia is ranked below that level. The VAT policy gap stood at 25.4% in 2023, consisting of a VAT rate gap of 7.3%, and a VAT exemption gap of 18.0%.
In 2023, Kosovo collected a total of €1 350 million in VAT revenue. The VAT compliance gap was estimated at €119 million, equivalent to 8.1% of the VAT Total Tax Liability (VTTL), representing a decrease of 3.4 percentage points compared to 2022. Between 2019 and 2023 the VAT compliance gap decreased from 18.4% to 8.1% (as shown in the figure). With an EU VAT compliance gap of approximately 9.5%, Kosovo is ranked below that level. The VAT policy gap stood at 16.5% in 2023, consisting of a VAT rate gap of 9.3%, and a VAT exemption gap of 7.2%.
In 2021, Ukraine collected a total of €16 748 million in VAT revenue. The VAT compliance gap was estimated at €3 553 million, equivalent to 17.5% of the VAT Total Tax Liability (VTTL), representing a decrease of 9.7 percentage points compared to 2020. Between 2019 and 2021 the VAT compliance gap decreased from 28.5% to 17.5% (as shown in the figure). With an EU VAT compliance gap of approximately 7.2% in 2021, Ukraine is ranked above that level. The VAT policy gap stood at 20.5% in 2021, consisting of a VAT rate gap of 3.2%, and a VAT exemption gap of 17.4%.
Reports 2009 - 2025
VAT compliance gap due to MTIC fraud
Missing trader intra-Community fraud (MTIC fraud) is a prominent form of VAT non-compliance. This type of fraud exploits VAT-free trade of goods and services between EU Member States. Fraudsters acquire goods and services VAT-free from another Member State, supply them to other businesses and charge VAT, before disappearing without remitting the VAT to the tax authorities (hence the term ‘missing trader’). We refer to VAT revenues lost due to this type of fraud as the ‘MTIC gap’.
The European Commission concluded a project to develop a methodology for estimating the MTIC gap. The first phase of the project assessed various methodological approaches to identify the best framework for recurrently estimating VAT revenue lost to MTIC fraud. Two methodologies were identified for further testing: an approach based on Intrastat data and classification data mining techniques, and an approach leveraging VIES data on intra-Community supplies and similar reporting obligations on intra-Community acquisitions. To gather data on intra-Community transactions, the Commission collaborates with Tax Administrations of EU Member States participating in the TADEUS project. Details on the processing and protection of individual-level data are provided in the privacy statement linked below. For more details on Phase I of the study, please download the full report or the executive summary.
The second phase of the project estimated the MTIC gap at EU level using Intrastat mirror-trade statistics. The results showed that the estimated annual MTIC gap ranged from €12.5 billion to €32.8 billion between 2010 and 2023. This represents an average annual VAT revenue loss of 1.2-3.1% of actual VAT revenue. Over the period, the MTIC gap increased slightly in nominal terms, driven by the growth of the tax base and trade volume. Despite this, the stability of the MTIC gap estimates over time suggests that factors other than MTIC fraud contribute to fluctuations in the VAT compliance gap. For more information about the detailed results, please download the full report or executive summary.
PRIVACY STATEMENT Ι 22 August 2024 Privacy statement: VIES and VIES-like data to estimate the MTIC gap |