Annex A. Methodological considerations

• Author: Adam Smietanka - Mikhail Bonch-Osmolovskiy - Grzegorz Poniatowski
• Pages: 78-87

VAT Gap in the EU-28 Member States

page 78 of 99

Annex A. Methodological Considerations

This section of the Annex is based to a large extent on the methodological considerations

already presented in earlier VAT Gap Reports. More detailed considerations regarding the

approaches to estimate the VAT Gap are presented in the seminal VAT Gap Report

(Barbone et al., 2013).

a. Source of Revisions of VAT Gap Estimates

Every year, the estimates of the VAT Gap are updated and revised backwards. There are

three different sources of such revisions:

1) Updates in the underlying national accounts data published by Eurostat: updates in VAT

revenues, new supply and use tables, and revised industry-specific growth rates, among

others.

2) Updates in the estimated GFCF liability, based on the new information from the own

resource submissions (ORS) on taxable shares of GFCF by five sectors: households,

government, NPISH, and exempt financial and non-financial enterprises.

3) Revision of the parameters of the VTTL model: effective rates, pro-rata coefficients, and

net adjustments, either due to new information from ORS or due to correcting errors in the

previous computation.

In nominal terms, the most significant revisions in 2018 concerned Malta. The revision of

the VTTL in Malta resulted from the availability of data from fiscal registers allowing for a

more accurate estimation of the effective rates and propexes for four sectors crucial for the

Maltese economy and its output, namely Financial services, except insurance and pension

funding (NACE and CPA 64), Insurance, reinsurance and pension funding services, except

compulsory social security (NACE and CPA 65), Services auxiliary to financial services and

insurance services (NACE and CPA 66), and Gambling and betting services (NACE and

CPA 92). Another noteworthy revision concerned Ireland and Germany. The estimates for

these two countries were revised backwards due to an improved methodology for imputing

missing and confidential values in Eurostat’s SUT.