The 27 member states saw an inflow of 61 billion euros, but the value was halted in 2021 due to bankruptcies, fraudulent activities, and VAT evasion. This figure is 38 billion euros below the level from the previous year, described by the European Commission as an unprecedented development in the annual report published this week. The study examines the gap between theoretical revenue and what is actually collected. In particular, Spain ranked third in the EU for the number of cases in this area, while the Netherlands and Finland reported a combined shortfall of 662 million euros, a decline of 0.8 percent from expectations.
The report notes that the latest VAT deficit figures offer positive news for public finances across Europe. The gains are largely credited to targeted national measures implemented consistently, according to the report. Paolo Gentiloni highlighted that revenue losses hamper governments’ ability to fund essential public goods and services such as schools, hospitals, and transportation. He urged governments to adopt the new recommendations on VAT in the digital era, which were put forward by the Community Administration to speed up and simplify access to corporate information. This approach is meant to curb VAT losses, especially from cross-border fraud. Brussels asserts that the new system will keep authorities in all member states fully informed about transactions in near real time, enabling swift intervention in VAT fraud cases, including carousel fraud.
More digitalization
The European Commission attributes part of the recovery to the lingering effects of the pandemic, while also noting that broader digitalization of tax systems and tighter controls on electronic payments and online purchases are driving improvements. The Commission explains that member states are benefiting from domestic tax measures such as new digital reporting tools, real-time transaction tracking, and e-invoicing regimes that are particularly effective against criminal tax fraud and VAT losses.
Estimates show that the Netherlands posted a negative difference of -0.2 percent, or -146 million euros, a result Brussels attributes to statistical or measurement errors in countries with very low values. Finland followed with -90 million euros (0.4%), then Spain with -662 million euros (0.8%), and Estonia with -49 million euros (1.4%). In Spain’s case, the 2021 figure is notably lower than the 2020 level of 3.396 billion, signaling a meaningful improvement. On the other side, the nations reporting the largest reductions in revenue due to fraud in nominal terms included Italy at -14.6 billion euros, France at -9.5 billion euros, and Greece at -9.0 billion euros. This snapshot reflects both reductions tied to fraud and the impact of more accurate measurement across the bloc, as detailed by Brussels and cited analysts.