“The uncollected VAT is higher than Romania’s state budget allocation for 2017 for education, infrastructure investments or healthcare,” said Daniel Anghel, Tax Services Partner, PwC CEE Indirect Tax Leader.
The data, presented in a study of the European Commission, show that Romania has managed, however, to improve its VAT collection throughout 2015.
“The VAT evasion diminished mainly due to implementing a reduced standard VAT rate on food and to collateral measures such as the reverse taxation and the limitation of payments in cash,” Anghel also said.
The EC study on VAT Gap in the 28 European Union member states comprises data for 2015. The study shows that EU countries lost an estimated total of EUR152 billion in VAT revenues in 2015.
While average EU figures are improving, individual VAT collection performances vary significantly amongst Member States. The largest VAT Gaps were reported in Romania (37.2%), Slovakia (29.4%) and Greece (28.3 %). The smallest gaps were observed in Spain (3.5%) and Croatia (3.9 %). In absolute terms, the highest VAT Gap of EUR35 billion was in Italy. The VAT Gap decreased in most Member States, with the strongest improvements in Malta, Romania and Spain. Seven Member States saw small increases: Belgium, Denmark, Ireland, Greece, Luxembourg, Finland and the UK.
While Member States have already made efforts to reduce the VAT Gap, modernising the VAT system and adapting it to the challenges posed by massive fraud is the best way to secure the future of the single market. The reform of the current VAT system should also help the development of the digital single market and complement the agenda set by the Commission to achieve a fairer and more efficient tax system in the EU.