Italy is the worst country in the EU, failing to collect US$54 billion — or nearly 34 percent of the potential revenue — which is huge considering it is one of the biggest economies in Europe. The latest figures released by the European Commission show that in 2013, the Greek VAT tax gap was 34 percent, just ahead of Italy.
EC study: VAT gap in Greece at 34 pct, more than double the EU average https://t.co/nxZjLKdc58 #Greece #tax #VAT pic.twitter.com/Y5i82s2Hfd
— MacroPolis (@MacroPolis_gr) September 4, 2015
The figure for Greece is symptomatic of the current economic mess it finds itself in today, having just being given a third bailout by its creditors. There were varying rates of VAT in Greece, which added to the confusion.
In Greece, all the islands were able to take advantage of a reduced VAT for years, which meant people buying the same thing in Athens and Kos were paying differing VAT and the government was losing revenue in Kos. Greek islands were enjoying a 30 percent discount. VAT in Greece will now rise from 13 to 23 percent.
Mind the Gap
According to the Commission, a total of US$190 billion in VAT goes uncollected in Europe and much of it due to tax evasion, fraud, bankruptcy or human error.
But the tax gap report has exposed widely differing tax systems in each country. Its latest figures (based on 2013 data) show a wide difference in tax rates in Europe, with Sweden charging 25 percent VAT, the Netherlands 21 percent and Malta 18 percent.
EU Commission estimate of UK VAT Gap lower than both EU median and HMRC's estimate (£12.4bn) h/t @delaFeriaR pic.twitter.com/u0cu9zPMwY
— Jo Maugham QC (@JolyonMaugham) September 8, 2015
The situation is compounded by each country having differing tax collection systems, leading to some collecting a bigger proportion of potential VAT revenues than others. The EU median tax gap is 13.9 percent. Sweden is among the best collectors with a low tax gap of only 4.3 percent, the UK 9.8 percent, Germany 11.2 percent and France 8.9 percent.
What makes matters worse yet is that there are 28 states in the EU with 75 different VAT rates and small online companies selling digital goods have to work out the right rate for every sale which is made by each customer in each country, which is driving many out of business.
