The European Commission Projects a Record Decline in VAT Gap in Lithuania in 2021
The value added tax (VAT) gap in Lithuania continues to narrow steadily. According to the European Commission (EC), the narrowing of the gap in the country in 2021 is the highest over the entire calculation period. This was announced today in the Report on the VAT Gap in the EU Member States published by the EC Centre for Social and Economic Research (CASE).
According to Minister of Finance Gintarė Skaistė, both growing confidence in the State and increasing taxpayers’ awareness, as well as the consistent work of the administrator in preventing tax irregularities in real time have contributed to the gradual narrowing of the VAT gap in Lithuania.
“The narrowing of the VAT gap in Lithuania shows that trust in the State is growing — people and businesses are increasingly willing to pay taxes transparently. This is also supported by the experience of recent shocks — from the pandemic to the rise in energy prices — where fair tax-paying businesses can expect an outstretched State aid hand at difficult times when taxes return in the form of subsidies. It is important to continue the focused work on by raising public awareness, improving tax administration tools and fighting the shadow economy. To this end, we are implementing an action plan to bridge the shadow economy and the value added tax gap, which I believe will help the positive trends to continue”, said Minister of Finance Gintarė Skaistė.
According to the EC survey, the VAT gap in Lithuania amounted to 19.3 % in 2020 and decreased by 1.6 percentage points as compared to 2019, and in 2021 it stood at 14.3 %, i.e. by 5 percentage points lower as compared to 2020. The EC announces a projected decline of this magnitude for 2021, taking into account the reliability of data and the significance of the decline only for countries showing exceptional progress. The final assessment for 2021 will be published in next year’s EC report.
The VAT gap means the difference between the inflows that the State could collect in the absence of shadow economy, reliefs and violations of the law and actual inflows.
Last updated: 13-02-2023
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