At €351 million, Malta has third highest uncollected VAT in European Union

Malta has continued to improve its VAT collection compliance with its VAT gap – the percentage of uncollected VAT – ‘declining’ to 35.3% through sustained strong revenue performance, figures released by the European Commission show.

But despite the improved performance – ranking first in terms of highest rise in compliance (6.33%) – Malta registered the third largest gap, preceded by Romania (37.89%) and Lithuania (36.84%).

This means that Malta’s gap is equivalent to €351 million, as yet uncollected VAT. Figures for 2013 show Malta’s VAT gap rate at 39% and 42% in 2012. 

The figures for 2014 emerge from figures released by the European Commission, in a report that was written by a team experts for the Directorate General Taxation and Customs Union.

Whilst no substantial changes were made to Malta’s VAT rates structure during 2014, one of the first initiatives undertaken by Finance Minister Edward Scicluna in 2013 was to draft up measures making it easier for those who are in default of VAT payments to regularise their position. Figures provided to the European Commission show that Malta’s VAT revenue for 2014 rose to €642 million, with the gap amounting to €351 million. The gap represents a decline of four percentage points.

Malta was noted as being amongst the four members states that that
significantly increased their revenue increased tax compliance along with substantially increasing their tax base.

Half of EU-27 Member States had a Gap below 10.40%.

Over all, a staggering €159.5 billion in VAT revenues were lost across the EU in 2014. Research shows that the overall difference between the expected VAT revenue and the amount actually collected amounted once again to an unacceptably high yearly figure.

The report found that, compared to 2013, the 2014 VAT GAP decreased by €2.5 billion but individual performances of Member States still vary enormously when it comes to VAT compliance. Some 18 Member States showed an improvement in their figures, while eight Member States failed to collect more VAT revenues than the year before.

The VAT Gap rate ranged from a high of 37.9% of uncollected VAT in Romania to a low of only 1.2% in Sweden. In absolute terms, the highest VAT Gap of €36.9 billion was recorded in Italy while Luxembourg had the lowest of €147 million.

"Our Member States are losing tens of billions of euros in uncollected VAT revenue. This is unacceptable. The current regime is woefully ill-equipped to deal with the problems of VAT fraud and miscalculations, and it's clear that the numbers will not get better by themselves,” Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs said.

“Member States must now quickly agree on a definitive fraud-proof EU VAT system, as laid out by the Commission earlier this year. I therefore urge all of our Member States to have a frank and meaningful discussion in order to feed into next year's proposals, so we can tackle this issue once and for all.”