TABLE OF CONTENTS 5

I. INTRODUCTION 7

II. ECONOMIC CONTEXT 9

II.a. EU Member States 9

II.b. EU candidate countries and potential candidates 22

III. POLICY CONTEXT 26

III.a. Changes in VAT policy in the EU and EU Member States 26

III.b. VAT rules in EU candidate countries and potential candidates 28

IV. VAT COMPLIANCE GAP IN THE EU, AND IN EU CANDIDATE COUNTRIES AND POTENTIAL CANDIDATES 33

IV.a. Scale and evolution of VAT compliance 33

IV.b. Special topic: Member States with post-COVID-19 increase in the VAT compliance gap 40

IV.c. Special topic: impact of the Superbonus 110 scheme on VAT compliance in Italy 46

IV.d. Special topic: VAT receipt lotteries 50

V. VAT POLICY GAP IN THE EU, AND IN EU CANDIDATE COUNTRIES AND POTENTIAL CANDIDATES 54

V.a. Scale and evolution of the VAT policy gap and its components 54

V.b. Special topic: drivers of changes in the VAT policy gap 62

VI. VAT COMPLIANCE AND POLICY GAPS – COUNTRY-SPECIFIC RESULTS 68

VII. CHANGES IN VAT REVENUE COMPONENTS (EU AND EU MEMBER STATES) 194

VIII. METHODOLOGY 196

VIII.a.Preliminaries 196

VIII.b.Estimation of the VTTL 198

VIII.c. VAT compliance gap backward update: 2000-2018 202

VIII.d.Notional ideal revenue, VAT policy gap and its decomposition 203

VIII.e.VAT compliance and policy gap fast estimates for 2024 209

VIII.f. Actionable standard VAT rate 210

VIII.g.C-efficiency 211

VIII.h.VAT revenue decomposition 212

VIII.i. Road-signalling criteria and their justification 212

LIST OF TABLES 215

LIST OF GRAPHS 221

LIST OF ACRONYMS AND ABBREVIATIONS 226

GLOSSARY 227

BIBLIOGRAPHY 229

ANNEX A: CHANGES IN VAT RULES AND COMPLIANCE MEASURES IN EU MEMBER STATES IN 2023 AND 2024 233

ANNEX B: VAT LEGAL MAPPING FOR EU CANDIDATE COUNTRIES AND POTENTIAL CANDIDATES 243

ANNEX C: METHODOLOGICAL APPENDIX 262

ANNEX D: REVIEW, ASSESSMENT AND REFINEMENT OF THE METHODOLOGICAL APPROACH 264

ANNEX E: DATA AVAILABILITY AND RELIABILITY 287

ANNEX F: COUNTRY-SPECIFIC RESULTS FOR COUNTRIES WITH ESTIMATES OUTSIDE PLAUSIBLE RANGES 297

ANNEX G: VISUALISATION AND DISSEMINATION OF RESULTS 311

ANNEX H: EXTERNAL REVIEWS 327

ANNEX I: STATISTICAL APPENDIX 350