Greece losing some 10 bln euros a year in uncollected VAT, says EC report

Greece lost some 40 billion euros in uncollected Value-Added Tax in the period from 2008-2011, according to a report published Friday by the European Commission aimed at estimating the so-called VAT Gap, defined as the difference between the expected VAT receipts if all the VAT which is due is collected and the actual VAT collected by European Union member states.

Greece had the second-worst performance behind Romania in the list of countries that have seen their VAT Gap grow since the start of the crisis, the EC report said, showing data that suggests Greece lost revenues of 9.7 billion euros in 2011 in uncollected indirect taxes and a similar amount in the three previous years as well.

The data compiled for the report show that up to 2008, there had been a moderate declining trend in the level of the VAT Gap, particularly in a number of post-accession countries.

However, from 2008, the VAT Gap in many (but not all) countries increased with recession and the financial crisis from 2008. Spain, Greece, Latvia, Ireland, Portugal and Slovakia saw the highest increases in their gaps, Friday’s EC report said.

Furthermore, the report notes, the VAT Gap does not only relate to fraud and evasion, but also to legal tax avoidance, bankruptcies, financial insolvencies, miscalculations and the performance of tax administrations.

The most recent report (figures before this report were only available until 2006) shows that the VAT Gap across the European Union’s 26 member states in 2011 amounted to 193 billion euros, or 1.5 percent combined gross domestic product (GDP).

The report also suggests that the VAT Gap can be attributed to complex tax systems with a narrow base and multiple rates and exemptions.

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