With a VAT gap estimated at 36.7% in 2021, Romania remains in first place among EU member states regarding non-collection of VAT, according to a report from the European Commission quoted by PwC. The 2021 figure is slightly lower than the 37.3% estimated in 2020.

Romania's losses from VAT, in nominal terms, amounted to EUR 9 billion in 2021, compared to EUR 7.9 billion in 2020.

"Every year, the European Commission monitors the VAT compliance gap because this tax is the most likely to be defrauded and, at the same time, it is among the main resources of the European budget. The deficit represents the losses state budgets have from VAT due to multiple causes: evasion, fraud, insolvencies, bankruptcy, administrative errors," explained Daniel Anghel, Partner and Leader of fiscal and legal services, PwC Romania.

"We see that, unfortunately, Romania continues to be the undisputed champion in terms of VAT losses, with EUR 9 billion in 2021. If we relate this amount to the country's budget deficit of the same year, of RON 80 billion, we notice that half of it could theoretically have been covered if VAT had been collected at the level at which the Netherlands or Finland succeed," he added.

According to reports from the European Commission, starting from 2015, Romania took the first place every year among member states, maintaining the highest gap in VAT. The EC notes that the gap remained high despite favorable conditions for improving VAT compliance.

"Overall, between 2013 and 2021, Romania's economy grew by 34% in real terms. Moreover, the Government significantly reduced the VAT burden by reducing the standard rate by 4 percentage points in January 2016 and by another percentage point in 2017. However, this decrease did not have a visible impact on the evolution of the compliance gap," PwC said.

The smallest compliance gap was observed in the Netherlands (0.2%), Finland (0.4%), and Spain (0.8%), while Romania (36.7%), Malta (25.7%), Greece (17.8%) and Lithuania (14.5%) are on the opposite side of the ranking.

irina.marica@romania-insider.com

(Photo source: PwC Romania)