In 2016 Croatia was among the three most successful EU countries in terms of VAT collection, along with Luxembourg and Sweden, showed a study published by the European Commission (EC) on Friday.

VAT is an important contribution to the national budget and is used to finance public services and fill the EU budget.

In 2016, the gap between the expected VAT revenue and the actually collected revenue at EU level decreased by €10.5 billion compared to 2015, to €147.1 billion, or 12.3 percent of the expected revenue, compared to 13.2 percent the year earlier.

The best performer in VAT collection in 2016 was Luxembourg, with the VAT gap of 0.85 percent, followed by Sweden, where the gap between the expected and the actually collected VAT revenue was 1.08 percent.

Croatia was third, with a VAT gap of 1.15 percent. In 2015, the VAT gap in Croatia was 4.22 percent.

Romania had the poorest results, with a VAT gap of 35.88 percent, followed by Greece with 29.22 percent, and Italy with 25.90 percent.
“The VAT gap decreased in 22 member states, with Bulgaria, Latvia, Cyprus, and the Netherlands displaying strong performances, with a decrease in each case of more than 5 percentage points in VAT losses. However, the VAT Gap did increase in six member states: Romania, Finland, the UK, Ireland, Estonia, and France,” the EC said.

“Member States have been improving VAT collection throughout the EU. This must be recognised and commended. But a loss of €150 billion per year for national budgets remains unacceptable, especially when €50 billion of this is lining the pockets of criminals, fraudsters and probably even terrorists,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.

VAT collection at EU level improved by an average 1.1 percent in 2016, which means an additional EUR 10.5 billion in the EU countries’ budgets, the EC says.

Aside from fraud, possible reasons for the non-collection of VAT include tax evasion, bankruptcy and wrong calculations.

The EC has called on all EU governments to improve auditing ahead of elections for the European Parliament scheduled for 2019.