Pierre Gramegna, here delivering the 2019 budget in April, said he was pleased that Luxembourg’s VAT gap shrank to just 0.7% in 2017.
Photo: Matic Zorman
Finance minister praises authorities as Luxembourg ranks second in EU table.
The grand duchy’s so-called VAT gap shrunk to just 0.7% in 2017 from 3.3% in 2016, a study released by the European Commission has found. Only Cyprus, at 0.6%, recorded a better result. Sweden, at 1.5%, was the only other country to have a gap below 2%. The European Commission defines the VAT gap as the overall difference between expected VAT revenue and the amount actually collected. It provides an estimate of revenue loss due to fraud and evasion, tax avoidance, bankruptcies, financial insolvencies as well as miscalculations.
The Commission report says that EU countries lost €137 billion in value-added tax revenues in 2017, but it did shrink by €7.9 billion. Commissioner for economic and financial affairs, Pierre Moscovici said a thorough reform of the VAT system to make it more fraud-proof was still required. “Our proposals to introduce a definitive and business-friendly VAT system remain on the table. Member States cannot afford to stand by while billions are lost to illegal VAT carousel fraud and inconsistencies in the system.”
The VAT gap decreased in 25 member states, with Malta (-7%), Poland (-6%) and Cyprus (-4%) showing the best improvements. But it grew in Greece by 2.6%, in Latvia by 1.9% and in Germany by 0.2%.
Luxembourg’s VAT revenue in 2017 amounted to €3,469 million. Several businesses that Delano has spoken to said that the authorities have been far less lenient in allowing delays to VAT bill payments. But finance minister Pierre Gramegna said he was “pleased with this good result” and that he “would like to congratulate the Administration de l'enregistrement, des domaines et de la TVA for its excellent work.”
The VAT gap report now includes “fast estimates” for the year preceding the publication year that indicate that the VAT gap will likely continue its downward trend and fall below €130 billion and 10% of the VAT total tax liability in 2018, the Commission said in a statement.