Analysis: Romania records largest VAT collection deficit in EU in 2022, namely 30.6%, downward trend

Romania recorded the largest VAT collection deficit in the European Union (EU) in 2022, losing 30.6% of the revenues related to this tax, but this percentage is 4.2% lower than in 2021, according to an analysis carried out by a tax consultancy company.At the end of 2024, the European Commission published the report on the VAT collection deficit (VAT Gap) for 2022. At EU level, the collection rate decreased by approximately 0.4%, with the deficit increasing from 6.6% in 2021 to 7% in 2022, according to a press release sent by Forvis Mazars.VAT revenue increased by around 109 billion euros in 2022 compared to 2021, largely due to the easing of restrictions imposed during the COVID-19 pandemic. Businesses, especially in hard-hit sectors such as hospitality and services, have resumed normal operations, leading to an increase in VAT revenue for member states.According to the consultants, the smallest VAT revenue deficits in 2022 were recorded in Cyprus (-0.7%), Portugal (1.3%) and Ireland (1.6%). At the opposite end, the largest deficits were observed in Slovakia (14.6%), Malta (25.9%) and Romania (30.6%). In terms of nominal VAT Gap, Italy leads the ranking with 16.3 billion euros, followed by Germany (12.9 billion euros) and France (12.8 billion euros). The smallest nominal VAT gaps were recorded in Cyprus (-18 million euros), Estonia (152 million euros) and Luxembourg (184 million euros)."In 2022, Romania continued to lead the EU ranking regarding the VAT collection gap in percentage terms, despite a decrease of 4.2% compared to the previous year. The country continues to lose approximately a third of the VAT that should be collected, and in 2022, the nominal value of these losses exceeded the threshold of 8 billion euros. After 10 consecutive years in which the VAT collection deficit exceeded 30%, Romania enters a downward trend for the first time, marking a significant decrease in it. We recall that the National Recovery and Resilience Plan (PNRR) includes a package of measures through which the Ministry of Finance has undertaken the most extensive reform of the tax administration, based on digitalization. The objective is to reduce the VAT collection deficit by 5 percentage points by 2026, compared to 2019, when this was 34.7%. Thus, Romania should reach a collection deficit of 29% in 2026", said Bianca Vlad, Tax Partner, Forvis Mazars in Romania, quoted in the press release.The company's consultants believe, however, that, for the time being, this decrease cannot be entirely attributed to the fiscal digitalization measures adopted by the Romanian authorities. However, given the firm commitment of ANAF and the Ministry of Finance to considerably reduce the collection deficit and the implementation schedule of these measures, they specify that it is expected that the results will be reflected in the VAT Gap report that will be published next year, for 2023. In that report, the effects of the implementation of the RO e-Factura and RO e-Transport systems, as well as of the SAF-T reporting, will be visible, claim the representatives of the quoted company.ANAF and the Ministry of Finance continued the process of reducing the VAT collection deficit, by outlining the legal basis that allowed the establishment of fiscal digitalization systems."RO e-TVA is the newest digitalization measure implemented starting August 1, 2024 by ANAF and the Ministry of Finance, intended to complement the already existing systems and further reduce the VAT collection deficit. In this regard, taxpayers will receive a pre-filled VAT return by the tax administration, with the information declared in RO e-Factura, RO e-Transport, SAF-T, etc, and the differences noted between the return submitted by the taxpayer and the e-TVA return will have to be justified", mentioned Iosif Coman, Tax Senior Consultant, Forvis Mazars in Romania.In Romania, the company has 30 years of experience in auditing, tax and financial consulting, outsourcing and sustainability. The local team includes over 370 professionals.