European Commission: Romania had the highest VAT collection deficit in the EU in 2015-2019

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The overall VAT collection deficit in EU member states decreased by about seven billion euros in 2019 compared to 2018, but in Romania it increased from 29.1 billion lei in 2018 to 35.1 billion lei in 2019, shows a new report published Thursday by the European Commission and quoted by Agerpres.

According to the document, in 2019, Romania recorded the highest VAT collection deficit at national level, with a loss of 34.9% of VAT revenue (compared to 32.7% in 2018), followed by Greece (25.8%) and Lithuania (23.5%). The smallest deficits were recorded in Croatia (1%), Sweden (1.4%) and Cyprus (2.7%). The European Commission points out that, in relative terms, Romania had the highest VAT collection deficit in the EU over the whole period 2015-2019.

In absolute terms, in 2019 the highest VAT collection deficits were recorded in Italy (€30.1 billion), Germany (€23.4 billion), France (€13.858 billion) and Romania (€7.411 billion).

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The EU executive points out that in most Member States the absolute year-on-year change in the VAT collection deficit was less than 2 percentage points. Overall, the share of the VAT collection deficit decreased in 18 Member States. Apart from Croatia and Cyprus, the most significant decreases in the VAT collection deficit were recorded in Greece, Lithuania, Bulgaria and Slovakia (between -3.2 and -2.2 percentage points in these four countries). Sweden, Finland and Estonia performed well from a different perspective: in these countries, tax authorities have managed for years to limit VAT revenue losses to less than 5% of the VAT due. The largest increases in the VAT collection deficit were observed in Malta (+5.4 percentage points), Slovenia (+3 percentage points) and Romania (+2.3 percentage points).

“Despite the positive trend in recent years, the VAT collection deficit remains a major concern – especially given the huge investment needs that our Member States have to address in the coming years. This year’s figures correspond to a loss of more than €4,000 per second. These are unacceptable losses to national budgets and mean that ordinary citizens and businesses have to make up the shortfall through other taxes to pay for vital public services. We must work together to tackle VAT fraud, a serious crime that hurts consumers’ pockets, undermines our welfare systems and drains government treasuries,” said economic commissioner Paolo Gentiloni.

In nominal terms, the overall VAT collection deficit in the EU fell by almost €6.6 billion to €134 billion in 2019, a significant improvement on the €4.6 billion drop recorded the previous year. Although the overall VAT collection deficit improved between 2015 and 2019, the full extent of the impact of the COVID-19 pandemic on consumer demand and therefore VAT revenue in 2020 is still unknown.

VAT revenue losses have an extremely negative impact on the spending that public administrations allocate to the public goods and services we all depend on, such as schools, hospitals and transport. At the same time, uncollected VAT could also have a positive effect as Member States strive to cover debt incurred during the initial recovery from the COVID-19 pandemic or to raise ambitions for climate finance.

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