The EU relies heavily on VAT as a significant source of revenue, accounting for approximately 18% of total tax income. However, tax fraud, evasion, and avoidance lead to substantial financial losses but also tax exemptions or tax subsidies, undermine both fair taxation and healthy competition. Since 2013, the European Commission has published annual reports analysing and estimating the VAT compliance gap and the VAT policy gap within the European Union.

The purpose of the current study is to prepare the 14th edition of the report, titled “VAT gap in Europe – Report 2026”, which will provide an updated assessment of both the VAT compliance gap and the VAT policy gap across the EU. The study will employ a top-down consumption-side approach, estimating the VAT gap by comparing the theoretical VAT liability – based on national accounts and other macroeconomic data – with the actual VAT revenue collected. This method enables a comprehensive analysis of the factors influencing VAT compliance, including economic, demographic, and policy-related variables.

The project contract was awarded by the European Commission, DG TAXUD, to Deloitte Accountancy, Tax & Legal Services BV/SRL and ZEW, with ZEW being a subcontractor of Deloitte Accountancy, Tax & Legal Services BV/SRL.