A staggering 35 per cent of all expected VAT revenue in Malta went uncollected in 2014, according to figures released by the European Commission today.

Malta's VAT gap, or difference between expected VAT revenue and the amount actually collected, was the third-worst across the EU. Only Lithuania (37 per cent) and Romania (38 per cent) did worse. 

In total, Malta lost out on €351 million in uncollected revenue during 2014. 

But despite Malta's poor overall showing, the statistics showed it was also among the EU countries to make the greatest strides in improving VAT compliance.

In 2013, Malta's VAT gap stood at 39 per cent; one year before that, it was as high as 42 per cent.  

The EU as a whole lost €159.5 billion in revenue due to VAT evasion during the year, for an average VAT gap of 14 per cent, the figures show. The high percentage was nevertheless an improvement on 2013, when the VAT gap was 0.69 per cent higher. Data did not include Cyprus due to the country's incomplete national accounts data.

Italy, with a total of €36.9 billion in uncollected VAT revenue, lost the largest chunk of revenue. 

Sweden's gap of 1.2 per cent was the EU's lowest, with Luxembourg (3.8 per cent) and Finland (6.92 per cent) in second and third place respectively. 

The European Commission said the findings supported its calls to overhaul the EU's VAT system to tackle fraud and make it more efficient.

"Today's figures show that deeper reforms are needed," the Commission said, citing its action plan, unveiled in April, to create a single VAT area.

Taxation Commissioner Pierre Moscovici said it was "unacceptable" for member states to be losing tens of billions of euros in uncollected VAT revenue.

"The current regime is woefully ill-equipped to deal with the problems of VAT fraud and miscalculations, and it's clear that the numbers will not get better by themselves," Mr Moscovici said.

The VAT gap study is funded by the Commission as part of its work to reform the VAT system in Europe and to clamp down on tax fraud and evasion. 



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