VAT gap narrows as authorities clamp down on tax evaders

The report identified three key areas which helped Poland achieve the reductions; modern legislation, effective administration and intensive cooperation with business. Darek Delmanowicz/PAP

In 2017 Poland had one of the biggest reductions in the VAT gap in the EU.

The VAT gap is the overall difference between the expected VAT revenue and the amount actually collected.

In 2016 Poland lost an estimated 20 percent of VAT revenues, this was down on the 2015 figure of 23.9 percent and it continued to fall in 2017 to only 14 percent.

Information released by the Ministry of Finance has shown that in the first half of 2019 the amount of VAT paid in Poland has increased by 6.8 percent since the same period last year.

An EU study entitled ‘Study and Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report’ predicts that in 2018 the VAT gap in Poland will be reduced even further to 9 percent. It also predicts that VAT revenue for 2018 will reach a record high of 172 billion PLN, over 50 billion more than was collected in 2013.

An EU study entitled ‘Study and Reports on the VAT Gap in the EU-28 Member States: 2019 Final Report’ predicts that in 2018 the VAT gap in Poland will be reduced even further to 9 percent. It also predicts that VAT revenue for 2018 will reach a record high of 172 billion PLN, over 50 billion more than was collected in 2013.EU

The value of the lost money due to the VAT gap was estimated to be 42 billion PLN in 2013 and was reduced to less than 25 billion PLN in 2017.

The trend of decreasing the VAT gap has been attributed to government policies. The Polish Economic Institute released a report in February 2019,  ‘Reducing the VAT gap: lessons from Poland’ which detailed how Poland could be used as an example to other countries in successfully reducing the VAT gap.

The report identified three key areas which helped Poland achieve the reductions; modern legislation, effective administration and intensive cooperation with business.

The further reduction in VAT gap and increased revenue for the Polish budget is one of the factors behind the 2020 budget being predicted to be the first balanced budget in Poland in 37 years.