Before the pandemic, the EU VAT gap was beginning to shrink as member states improved their collection processes. New reporting techniques such as e-invoicing meant that member states were on the right track to reducing the tax gap. However, the pandemic saw consumption decline and GDP growth slow, and thus the EU VAT gap widened once again. Today we’re going to take a closer look at the figures, and what steps we can expect to see the member states take to try and combat this trend.

EU VAT Gap Widened

Currently, experts are predicting that the EU VAT gap will equate to more than €164 billion by the end of the year. This would mean that the EU has roughly lost €4,000 a second. This would represent a considerable jump from 2019, where EU countries are thought to have lost roughly €134 billion in lost tax revenue. This was a decrease of €7 billion from 2018.

Another way that we have seen countries lose money is from tax fraud. Many dubious opportunists attempted to con tax authorities during the pandemic by wrongly applying for the aid offered by governments during the pandemic. At the time of writing, governments from all over the world are investigating these individuals in an attempt to recoup some of their lost money, and to reduce the EU VAT gap.

What Measures Are We Likely To See Introduced To Combat The EU VAT Gap?

As mentioned in the previous section, governments are likely to step up their attempts to find misplaced taxpayers’ money from the pandemic. In addition, we will certainly see an increase in tax investigations. This will likely affect ecommerce sellers. Since ecommerce is still a relatively new marketplace, tax authorities are yet to work out how to adequately collect tax from this industry.

Furthermore, the EU VAT gap is likely to benefit from the introduction of environmental taxes. Globally, we are about to see a huge increase in environmental taxes as governments seek ways to force companies to lower their carbon footprint. This will represent quite a difficult task for MNEs as there are very few tax professionals who specialize in this area. Should you and your business require any support with environmental taxes such as plastic taxes or carbon taxes, we can help. Contact us today for a free consultation regarding the tax services we can offer to help you and your business.

If You Are An Ecommerce Seller, We Can Provide You With Solutions

This an exciting time to be an ecommerce seller, but at the same time these constant rule changes can be distressing and confusing. Luckily, we are here to support you through the EU VAT gap. Whether it is expanding your business to another country or you just need supply chain support, we at J&P Accountants have been supporting ecommerce sellers for years and can offer you a range of services.

If you are a business who participates in cross border ecommerce, we would be more than happy to help you register for VAT, file your VAT returns, and help you comply with VAT in case your account faces any issues. At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis and the busy festive period, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to