Q&A: VAT in the digital age

The VAT gap – the difference between the estimated VAT revenue that is owed versus the amount that is collected – is a growing problem in the EU and an expensive one. The European Commission’s 2022 report on the VAT gap revealed a €93bn in loss of VAT revenues for member states in 2020 (tinyurl.com/euvatgap2022). One quarter of this amount is attributed to fraud related to intra-EU trade.

In response in December 2022 the commission announced its VAT reform proposal known as VAT in the digital age (ViDA). The main objective is to modernise and develop a more robust VAT system in combating fraud and tax evasion. In May 2024 the Economic and Financial Affairs Council was due to reach an agreement on the implementation of the ViDA reforms but failed to do so following a veto vote from Estonia. ...