A new study published by the European Commission has found that EU countries lost almost €150 billion in Value-Added Tax (VAT) revenues in 2016 despite the Member States having carried out significant work to improve VAT collection.

The Commission’s head of Economic and Financial Affairs, Taxation and Customs Affairs, Pierre Moscovici, said the figures show that reform of the current EU VAT system combined with better cooperation at EU level is needed so that each of the bloc’s members can make full use of VAT revenues in their budgets.

“A loss of €150 billion per year for national budgets remains unacceptable, especially when €50 billion of this is lining the pockets of criminals, fraudsters and probably even terrorists. A substantial improvement will only come with the adoption of the VAT reform we proposed a year ago. I urge the Member States to move forward on the definitive VAT system before the European Parliament elections in 2019,” said Moscovici.

The VAT Gap decreased by €10.5 billion to €147.1 billion in 2016, a drop to 12.3% of total VAT revenues compared to 13.2% the year before. The individual performance of the Member States still varies significantly as the gap decreased in 22 Member States, with Bulgaria, Latvia, Cyprus, and the Netherlands displaying strong performances, with a decrease in each case of more than 5 percentage points in VAT losses. However, the VAT Gap did increase in six Member States: Romania, Finland, the UK, Ireland, Estonia, and France.

Despite significant progress being made to improve VAT collection and administration at the EU level, Member States should now move forward and agree as soon as possible on the much broader reform to cut down on VAT fraud.