VAT Gap Widening by €27 Billion Across the EU

The European Commission’s latest VAT Gap report shows that the annual VAT Gap in the EU increased by approximately €27 billion, rising to around €128 billion in 2023. In 2022, the gap was estimated at €101 billion, meaning the average shortfall now represents 9.5 % of total VAT revenue that should have been collected.

While this increase does not necessarily indicate that tax authorities have become less effective, it strengthens the case for B2B and B2C electronic invoicing as a tool to improve compliance.

Countries with major increases in their VAT gaps include:

• Estonia: 5.2 % → 10.3 %
• Ireland: 2.3 % → 8.3 %
• Latvia: 2.0 % → 5.4 %
• Poland: 11.2 % → 16 %
• Romania: 26.7 % → 30 %

Countries that saw reductions include:

• Croatia: 11.4 % → 7.7 %
• Cyprus: 6.3 % → 3.3 %
• The Netherlands: 9.6 % → 7 %
• Slovenia: 8.4 % → 4.9 %

The widening VAT Gap highlights persistent compliance challenges across the EU and underscores the importance of modernising invoicing and tax reporting systems. Electronic invoicing plays a key role in reducing gaps, improving revenue collection, and increasing transparency in both B2B and B2C transactions.