Italy – EU Country With Highest VAT Evasion (But Situation Is Improving)

The European Union has revealed VAT evasion in 2021 amounting to 61 billion euros.

Italy holds a sad record in this ranking, topping the “VAT Gap” list with 14.6 billion euros. This index estimates the difference between expected revenues under this item and those actually collected. However, the figure is improving both at EU level (38 billion less than in 2020) and in Italy, which recorded a 10.7% gap reduction. This is an unprecedented figure and the best among the countries of the Union.

“According to the 2023 VAT Gap Report published by the European Commission, the majority of EU member states have made progress in collecting value added tax (VAT) in 2021. The annual study shows that member states short-received about 61 billion euros in VAT in 2021, compared with 99 billion euros in 2020,” the European Commission said in a statement. “This figure represents revenue lost due to fraud, VAT evasion and circumvention, non-malicious bankruptcy, miscalculations, and financial insolvency.”

The Brussels-based report shows that while some revenue losses are “physiological” or at least unavoidable, targeted policies adopted by EU countries are having tangible results. Digitalization of tax systems, real-time transaction reporting, and electronic invoicing have a particular impact on this generally “virtuous” behavior.

“At the same time,” explains the European Commission, “even temporary factors, such as government support measures during the COVID-19 pandemic, which were often linked to tax payment, could contribute to this positive change.”