24 Oct 2023
Europe, Financial sector, External Publications

VAT gap in the EU. Report 2023

This Report has been prepared for the European Commission, DG TAXUD, for the project TAXUD/2019/AO-14, “Study and Reports on the VAT Gap in the EU-28 Member States”, and is a follow-up to the eight reports published between 2013 and 2020. 

The report provides yearly Value Added Tax (VAT) Gap estimates for the EU-28 covering the 2015-2019 period. We calculate the VAT Gap as the difference between the VAT due and the actual VAT revenues. As such, it represents the VAT revenues lost compared to a theoretical VAT calculation. The underlying reasons for this VAT Gap can be grouped into four broad categories: (1) VAT fraud and VAT evasion, (2) VAT avoidance practices and optimisation, (3) bankruptcies and financial insolvencies, and (4) administrative errors. 

In 2021, several EU Member States introduced temporary changes to their VAT systems. Germany reverted to its standard rate in January 2021 after temporarily reducing it in 2020 as a measure to stimulate the economy amidst the pandemic. Similarly, Ireland had a temporary reduction in VAT that lasted until February 2021, after which it reverted back to its normal rate. Sector-specific adjustments were also prevalent across various countries. Several countries implemented measures to mitigate high energy costs. Cyprus, Czechia, and Spain introduced a temporary reduction in VAT rates on electricity consumption. Other countries introduced changes to VAT rates for products and services associated with the COVID-19 pandemic 

The same year, GDP increased in all 27 EU Member States, largely due to the gradual economic recovery from the COVID-19 pandemic and the measures introduced to limit its impacts. In total, the EU-27 economy grew by 5.6 percent in real terms compared to 2020. The core component of the VAT base – household consumption – increased by 6.6 percent in nominal terms in the EU-27. 

The study covers the VAT compliance gap, VAT policy gap, its components, and the C-efficiency.


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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, Adam Śmietanka, and Aleksandra Sojka. Research assistance was provided by Krzysztof Orzechowski.