Epidemic does not impact VAT collection - press

The VAT gap last year may have remained at the same level as 2019 or may even have shrunk, despite the economic turmoil caused by the pandemic.

Preliminary estimates by CASE (the Centre for Social and Economic Research), which compiles a report each year on VAT for the European Commission, indicate that the gap should conform to estimates laid out in the state budget.

"The gap in VAT, which is the difference between what the budget received from tax on goods and services and the amount it should have received taking into account the condition of the economy, may even be minimally smaller than in 2019," the newspaper Dziennik Gazeta Prawna reported.

Grzegorz Poniatowski, the CASE Foundation's academic director for fiscal policy, and one of the main authors of the report, was quoted by the daily as saying the VAT gap may be 1 to 1.5 percentage points smaller compared to 2019.

"That would mean that it stood at 8.7-8.2 percent of potential inflows," the paper wrote. Poniatowski warned, however, that his calculations are based on a number of assumptions and may be biased. It is assumed, for example, that the Central Statistical Office has not changed its flash GDP estimates.

The paper pointed out that an additional complication that may affect the 2020 VAT gap figures was the introduction of a new VAT matrix that assigned tax rates to goods and services.

"Hence, although my estimates show a slight fall, it is safer to say that it did not grow," Poniatowski told the paper. "And its potential fall was not as clear as in previous years."

Lukasz Czernicki, the Finance Ministry’s chief economist, also quoted by Dziennik Gazeta Prawna, believes that nominal GDP may also be a factor, being higher in 2020 than in 2019.

He also said that it had been possible to avoid "unsealing" VAT collection.

"During the previous crisis the system became very unsealed," he said. "It can be seen that the tools introduced since 2016 (...) work, and the way they have tightened VAT has turned out to be crisis resistant.

"Cashless turnover may also have limited the grey zone - a large proportion of trade transferred to the internet," he added.

The paper reported that the Ministry of Finance is still working on its VAT gap calculations for 2020 and that the first official estimates will appear in an update, which must be sent to the European Commission by the end of April.

"Our calculation work from the end of last year shows that the gap remained at a similar level to 2019, i.e. about 12 percent of potential inflows," Czernicki said.