Monday 22 January 2018

State loses out on €1.1bn in one year as VAT goes uncollected

Sarah McCabe

Sarah McCabe

BY FAILING to collect or ensure compliance with VAT rules, the State lost €1.1bn in 2011 alone.

This means tax revenues worth about 0.7pc of all gross domestic product that year simply slipped through the net.

The statistics come from a new EU study, which showed that Ireland expected to collect €10.9bn in VAT returns in 2011 – but actually only took in €9.8bn.

This €1.1bn shortfall is known as the 'VAT Gap'. It is a result of fraud and other forms of non-compliance, as well as bankruptcies and insolvencies, statistical errors, delayed payments and legal avoidance.

While obviously problematic in Ireland, the VAT Gap is even more extreme in other countries. In Ireland, a tenth of VAT returns went uncollected in 2011; in Italy, 27pc went uncollected. The statistics are even more pronounced in parts of Western Europe.

The worst results came from Romania, where 48pc of what was expected – or 8pc of GDP – went uncollected.

At EU level, combining all the member states, the VAT Gap resulted in a loss of €193bn in the one year alone.

"The amount of VAT that is slipping through the net is unacceptable, particularly given the impact such sums could have in bolstering public finances," said EU Commissioner for Taxation Algirdas Semeta. "However, there is also a positive message to be drawn from today's findings.

"Our ambitious reform of the VAT system, the EU measures to combat tax evasion and our recommendations for national tax reforms, are all targeted in the right direction.

"We know the problem; we have identified solutions to it, and now it's time for member states to act.

"Today's figures will serve as a baseline to assess their progress in improving VAT compliance in the years ahead."

Irish Independent

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