The recently released 2023 EU VAT Gap Report by the European Commission has shown a continued narrowing of the VAT gap which began in 2013. This comprehensive report dives into the factors propelling this positive trend and seeks to investigate recent measures’ potential impacts, as well as casting an eye towards future expectations. As explained in depth by global law firm Allen & Overy LLP, it provides critical analysis that legal practitioners working within multinational corporations and high caliber law firms will find essential.
For those unfamiliar, the VAT gap represents the disparity between the amount of VAT theoretically due and the amount actually collected. The decreasing trend implies that member states are becoming increasingly efficient in collecting VAT, which is a key source of government income. Yet while this progress is commendable, the journey of closing the VAT gap completely is far from over. The report suggests there are still an array of challenges and grey areas to grapple with as we move beyond 2023.
With insights from the European Commission’s detailed examination of traits common to states with notable VAT gap reductions, multinational legal departments and law firms can gain valuable knowledge. These traits can then be used to predict future trends, assist in strategic planning, and possibly influence lobbying activities to alter business-unfriendly VAT legislation.
Preparing for the future VAT landscape requires a keen understanding of the ongoing trends and how recent measures may shape the playing field. There is a fine line to walk between maintaining compliant practices amidst changing VAT T&Cs while efficiently utilising resources. The newfound insights gleaned from the 2023 EU VAT Gap Report can help legal professionals tread this line confidently.
Beyond just a tool for understanding VAT collection efficiency, the VAT Gap Report serves as a critical resource for assessing fiscal health and broader economic factors. The trends and insights it unveils enhance the understanding of the economic health of EU member states and, by extension, impact multinational corporations operating within those borders. Therefore, the more we delve into and exploit the potential of this released tool, the more adept we will become at predicting and managing changes in the VAT landscape.