VAT gap in Europe. Edition 2025

Publications

12 Dec 2025

Fiscal Policies and Growth

Jan Hagemejer

Aleksandra Kolasa

Jan Sadowski

Andrzej Robaszewski

Marta Kowerko-Urbańczyk

Download publication

Jan Hagemejer

President of CASE Management Board
Jan Hagemejer’s areas of expertise are international trade as well as macroeconomic and structural issues. He graduated from University of Warsaw where he also obtained his PhD and habilitation, as well as from Purdue University (MA in Economics). He works as an associate professor at the Faculty of Economic Sciences, University of Warsaw. Prior to … <a href="https://case-research.eu/publications/vat-gap-in-europe-edition-2025/">Continued</a>

Articles from this author:
- Future outlook of EU-Moldova trade and investment relations
  This study explores the evolution and prospects of economic relations between the European Union and the Republic of Moldova.
- Shortening and simplifying EU anti-dumping and anti-subsidy investigations with a view to practices favourable for SMEs
- An update on the economic, sustainability and regulatory effects of the trade part of the EU-Mercosur Partnership Agreement
Author’s articles
Aleksandra Kolasa

Senior Economist
Dr Aleksandra Kolasa is a Senior Economist at the CASE - Center for Social and Economic Research, where she is responsible for econometric analysis and economic research, primarily in the area of taxation. Her academic interests revolve around monetary poverty, inequality, and household welfare. She has extensive experience working with micro-level data and life-cycle models with heterogeneous agents. Before joining CASE, Aleksandra led an NCN research grant at the University of Warsaw on the impact of non-income related benefits. From 2010 to 2017, she served as a Senior Economist at the National Bank of Poland, specializing in household sector topics. Her professional experience also includes consulting for the World Bank and working as a data scientist in tech companies. Aleksandra holds a PhD in Economics (with distinction) from the University of Warsaw and an MA in Mathematics from the same institution.

Articles from this author:
- The Brewing Industry in Poland. Impact on the Polish Economy. 2025 Edition
Jan Sadowski

Junior Economist
Jan Sadowski is a Junior Economist at the Center for Social and Economic Research. His work focuses on data acquisition, analysis, and visualization.

Articles from this author:
- The CASE 2025 Christmas basket
- The Brewing Industry in Poland. Impact on the Polish Economy. 2025 Edition
Andrzej Robaszewski

Director of Fiscal Policy Studies and Sustainable Development
Andrzej Robaszewski is Director of Fiscal Policy Studies and Sustainable Development. His areas of expertise also include EU economic governance, energy markets and ESG.

Articles from this author:
Author’s articles
Marta Kowerko-Urbańczyk

Communication Manager

The report provides an updated analysis of the VAT compliance gap and the VAT policy gap across EU Member States, as well as selected EU candidate and potential candidate countries, covering trends over the period 2019-2023 and, for the first time, including selected EU candidate and potential candidate countries. It examines the discrepancy between the theoretical VAT Total Tax Liability (VTTL) and actual VAT revenues, offering insights into inefficiencies in tax compliance and revenue losses driven by policy choices.

Main areas of analysis:

Economic and policy context: VAT revenues were strongly influenced by a sequence of major shocks, including the COVID-19 pandemic, Russia’s war of aggression against Ukraine, high inflation and the cost-of-living crisis. After a strong rebound in 2021-2022, VAT revenue growth slowed markedly in 2023, resulting in a decline in real terms.
VAT compliance and policy gaps: In 2023, the EU VAT compliance gap increased to 9.5% of VTTL, corresponding to EUR 128 billion in uncollected revenue, confirming a reversal of the pre-pandemic improvement trend. The VAT policy gap remained high at 50.5% of notional ideal revenue, largely driven by exemptions and reduced VAT rates.
Cross-country variation: Compliance gaps ranged from 1% in the best-performing Member States to 30% in the weakest, while candidate countries showed comparable dispersion. VAT policy gaps were highest in Spain and Greece and lowest in Bulgaria and the Baltic States.
VAT policy and compliance measures: Member States continued to roll back crisis-related relief measures, introduced new reduced or zero rates for selected goods, and strengthened compliance through tools such as e-invoicing, reverse-charge extensions and enhanced enforcement mechanisms.
VAT system efficiency: The report further analyses the structure of the VAT policy gap, estimates actionable standard VAT rates and compares C-efficiency across countries, highlighting significant differences in revenue performance and the dominant role of non-actionable exemptions.

The findings provide a robust evidence base for shaping future VAT policy reforms and compliance strategies in the EU, supporting efforts to improve revenue efficiency while assessing the fiscal impact of tax policy design.

The report was prepared on behalf of the European Commission, Directorate-General for Taxation and Customs Union (DG TAXUD), by Syntesia and CASE (Center for Social and Economic Research).

Related publications

No results

VAT gap in Europe. Edition 2025

Jan Hagemejer

Articles from this author:

Aleksandra Kolasa

Articles from this author:

Jan Sadowski

Articles from this author:

Andrzej Robaszewski

Articles from this author:

Marta Kowerko-Urbańczyk

Related publications

Thanks for joining us!

Join the community of informed readers. Subscribe to our newsletter.