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Spain stands fourth in the rankings of EU countries with the lowest VAT gap

  • A European Commission report, coordinated by CASE in collaboration with the Barcelona Institute of Economics, calculates that the cumulative gap in VAT revenue collection on the continent amounts to 147 billion euros


The cumulative gap in the VAT revenue collection of the 28 members of the European Union in 2016 stood at 147 billion euros, that is, 1% of European GDP. This is the figure calculated by the ‘Study to quantify and analyze the VAT Gap in the EU Member States’, commissioned by the European Commission and coordinated by the Polish Center for Social and Economic Research (CASE), in collaboration with the Barcelona Institute of Economics.

The study calculates what is known as the Value Added Tax gap, that is, the difference between the VAT collection that should be obtained with perfect compliance and actual collection in the whole of the European Union. Spain occupies fourth place in the rankings – behind only Luxembourg, Sweden and Croatia – of countries with the lowest VAT gap.

The value of the tax gap in Spain is 2.71%, almost 2,000 million euros, well below the European average, which stands at 9.9%, thus placing the level of compliance in Spain well above the average. For the third consecutive year, the Spanish gap has closed, among other reasons, thanks to the improvement in the economy.

The study also estimates the so-called Policy Gap, that is, the tax revenues that go uncollected as a result of the multiple exemptions and reduced rates provided for in the fiscal regulations. Here, Spain, in fact, presents the highest value among all the EU member states, 60%, which means that were VAT compliance to be perfect, the exemptions provided for in its regulations mean that only 40% of the total potential revenue can be collected.

“The productive structure and economic situation of each country, as well as the size of the tax administration and expenditure on new technologies are some of the variables that impact the size of the tax gap”, according to Alejandro Esteller and José Mª. Duran, the IEB researchers that participated in the study.

Positive European evolution

The results for the EU as a whole show a positive evolution, the gap being closed by almost one percentage point. Yet, the disparity between states remains high, with the VAT gap in more than one country rising above 25%.

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