Complexity of the VAT in Europe March 21, 2019 Elke Asen Elke Asen This week’s tax map shows the number of hours it takes businesses across Europe to comply with the Value-Added Tax. The Value-Added Tax (VAT) is considered one of the most efficient and neutral forms of taxation. When designed with a low rate and a broad tax base, it limits economic distortions while raising sufficient tax revenue. However, complying with the VAT can be complex due to provisions such as reporting and invoice disclosure obligations, requiring businesses to devote resources to tax compliance instead of other productive activities. One way of estimating the VAT’s administrative burden is to measure the number of hours in a year it takes businesses to comply with the tax. The time to comply indicator reflects the average number of hours it takes a medium-size business per year to prepare, file, and pay VAT, as measured by PwC’s “Paying Taxes 2018” component of the “Doing Business” report from the World Bank. When comparing VAT compliance times across Europe, it is important to keep in mind that the methodology used to calculate this indicator is based on certain assumptions and simplifications, making it an approximation rather than a precise measure. Switzerland’s VAT compliance takes the least amount of time in Europe, at eight hours, followed by 14 hours in Estonia and 22 hours in Luxembourg. In contrast, complying with the VAT requires the most amount of time in the Czech Republic (108 hours), Poland (98 hours), and Hungary (96 hours). While efficiency plays an essential role when designing tax policies, simplicity and transparency are also important. As this series on tax complexity has shown, the administrative burden put on businesses to comply with corporate, labor, and consumption taxes is relatively high in some European countries, imposing costs on businesses and the economy. These costs could be avoided or minimized through better tax administration policies or systems. VAT Complexity Source: Tax Foundation’s International Tax Competitiveness Index. (Measures are based on PwC’s “Paying Taxes 2018” component of the “Doing Business” report from the World Bank.) Country Hours Needed to Comply with the VAT per Year Austria 35 Belgium 75 Czech Republic 108 Denmark 40 Estonia 14 Finland 24 France 31 Germany 43 Greece 69 Hungary 96 Iceland 40 Ireland 30 Italy 30 Latvia 66 Luxembourg 22 Netherlands 34 Norway 44 Poland 98 Portugal 90 Slovak Republic 84 Slovenia 69 Spain 35 Sweden 36 Switzerland 8 Turkey 91 United Kingdom 25 Note: This is part of a map series in which we examine tax complexity in Europe Complexity of Labor Taxes in Europe Complexity of the Corporate Income Tax in Europe International Tax Competitiveness Index Stay informed on the tax policies impacting you. Subscribe to get insights from our trusted experts delivered straight to your inbox. Subscribe Share Tweet Share Email Topics Center for Global Tax Policy Business Consumption Taxes Business Tax Compliance and Complexity Business Taxes Data Global Tax Maps Value Added Taxes Value-Added Tax (VAT)