Why the VAT gap has shrunk
The reduction recorded in Greece’s value-added tax (VAT) gap – i.e. the difference between the expected and actual VAT revenue – is not temporary and is the result of the measures taken to limit tax evasion, combined with the increase in the use of cards during the pandemic, a situation that continues today, a senior Finance Ministry official explained to Kathimerini.
The annual European Union report on the matter on Thursday showed a significant reduction of 32.3% in Greece’s VAT deficit in 2020 compared to 2019.
In 2019 Greece had been at the bottom of the chart, along with Romania and Malta, recording the largest VAT gap, while in 2020 the situation changed and Greece climbed near the top in terms of reducing VAT evasion, together with Germany, Hungary and the Netherlands.
Besides the effect of expanded card use in 2020, the pandemic also led to entire sectors of the economy that usually take the lead in tax evasion – such as food service etc – being forced to close due to the pandemic.
The same official said figures will show a further decline in 2021 as measures and new digital tools help further curb tax evasion. According to provisional estimates and the EU report, the VAT gap will be reduced in 2021 to 2.436 billion euros.
According to EU data, the VAT gap was reduced from €4.7 billion in 2019 in 2020 to €3.18 billion. Greece was the country with the fourth largest VAT deficit reduction in the European Union in 2020. It shows a reduction in the VAT deficit by 3.7 percentage points – i.e. to 19.7% of the expected revenue under full compliance in 2020, against 23.4% in 2019.
The same ministry sources state that in 2020 an important role in reducing the VAT gap belonged to the increase in the limit of electronic receipts that reached 30% of the declared income, and the significant increase in electronic transactions.
Of the €3.18 billion VAT gap, a portion is VAT exemptions and reduced rates and the rest a result of fraud, tax evasion and bankruptcies.
