The Global Impact of Manual VAT Systems
Manual VAT processing creates significant challenges for governments and businesses worldwide, leading to revenue loss, high costs, and increased fraud.
The Global VAT Gap
The VAT gap is the difference between expected and collected VAT revenue. In the EU, it was about €89 billion (7.0%) in 2022, down from earlier years but still material. In some developing economies, estimates range much higher.
Source: European Commission VAT Gap (2024, 2022 data).
High Administrative Burden
Businesses—especially SMEs—can spend 200–400 hours per year on tax compliance. Manual processing also forces governments to maintain large, costly compliance operations.
Indicative range across multiple studies; hours vary by country and tax regime.
Increased Fraud Risk
Manual systems are vulnerable to schemes like carousel fraud, fake invoicing, and under‑reporting—costing governments billions annually and eroding trust.
See sources below for cross‑country evidence and trends.
A Global Snapshot of the VAT Gap
VAT Gap as % of Potential Revenue (Selections)
Mixed‑year snapshot for illustration (see table for notes).
VAT Gap Breakdown by Country/Region
| Country/Region | VAT Gap (%) | Notes / Year |
|---|---|---|
| Sub‑Saharan Africa (median/est.) | ~30–50% | IMF & research syntheses; varies by country/year |
| Sri Lanka | ~45% | Estimate; varies by methodology |
| Romania | 36.7% | EU 2021 estimate; among highest in EU |
| Bangladesh | ~32% | Estimate; varies by year |
| Pakistan | ~28% | Estimate |
| Indonesia | ~27% | Estimate |
| Mexico | ~25% | Estimate |
| India (GST) | ~22% | Estimate |
| Egypt | ~20% | Estimate |
| Saudi Arabia | ~15% | Estimate |
| UAE | ~12% | Estimate |
| Italy | 9.9% | EU estimate (year varies) |
| Australia (GST) | ~5.5% | ATO 2021–22 net gap |
| Japan | ~5% | Estimate |
| New Zealand | ~3% | Estimate |
Figures are indicative and compiled from public sources; methodologies and years differ. See sources.
Sources & Notes
- European Commission – VAT Gap portal (2024, 2022 data): VAT gap in the EU.
- EU country reports & summaries indicating high gaps (e.g., Romania): see EC materials and independent summaries for ~36.7% (2021).
- Australian Taxation Office – GST gap (net gap ~5.5% in 2021–22; series updated 2024): ATO GST gap.
- IMF/OECD research and national tax offices for developing‑country estimates (ranges vary; methodology notes apply).
Caution: Cross‑country VAT gap figures are not always comparable. They depend on data quality, shadow‑economy assumptions, and policy definitions.
From Problem to Solution
Manual VAT makes compliance harder and fraud easier. Rover Cyber VATEase digitizes the end‑to‑end journey—registration, invoicing, filing, refunds, monitoring, and fraud detection—so governments raise revenue reliably and businesses spend less time on paperwork.