Fair and simpler taxation supporting the recovery strategy

Two European Added Value Assessment (EAVA) studies on value added tax (VAT) and corporate income tax (CIT) were carried out in 2021 for the European Parliament’s Subcommittee on Tax Matters (FISC). They identified gaps in EU legislation in these areas and evaluated the European added value of various policy options to address these gaps.

The EAVA studies found that estimated VAT and CIT losses for the EU as a whole, including cross-border evasion and fraud, were €270 billion in 2020, more than twice the entire annual EU budget. Moreover, they confirmed that businesses, and particularly businesses involved in cross-border trade and investment, often face high compliance costs, estimated at more than €80 billion in 2020.

The EAVA studies concluded that further action, supporting more rapid convergence of Member States towards best practices, could significantly reduce complexity, make tax administration more effective, increase transparency, facilitate digitalisation and improve enforcement. This could lead to substantial benefits over the next few years, as total VAT and CIT losses could potentially be reduced by between €52 billion and €117 billion and compliance costs by between €17 billion and €30 billion, depending on the preferred scenario.