VAT: A €128 Billion Hemorrhage

The most striking figure concerns Value Added Tax. In 2023, the difference between the VAT theoretically collectable and the amount actually paid reached €128 billion.

Beyond evasion, the report highlights a 50.5% “policy gap” driven by reduced rates and exemptions, which is particularly pronounced in Spain (59.1%) and Greece (57%).

Corporate Profits: A New Standardized Methodology

For the first time, thanks to the Joint Research Centre, the EU has a harmonized methodology to estimate the Corporate Income Tax (CIT) gap. Data shows an average compliance gap of 11%. While nations like Slovakia and Romania exceed the 20% threshold, Denmark and the Netherlands maintain losses below 3%, showcasing the effectiveness of their monitoring systems.

Four Pillars for the Future of Taxation

The Commission goes beyond diagnosis, outlining a roadmap for Member States to follow:

• Estimation Capacity: Establish specialized teams to constantly monitor tax gaps and publish data regularly to build public trust.
• Review of Policy Choices: Evaluate whether thousands of existing tax exemptions remain effective or if they represent an unsustainable cost to public finances.
• Digitalization and AI: Accelerate the integration of Artificial Intelligence within tax administrations to identify risks and fraud in real-time.
• ViDA Reform: The VAT in the Digital Age initiative will be crucial, introducing e-invoicing and automated reporting for cross-border markets.