Romania saved, through harsh austerity measures, less than half of what it could save by bringing VAT revenues to the EU27 level, according to an analysis by Friedrich Ebert Romania.
Romania has by far the largest VAT collection gap in the European Union: the difference between what it should collect from VAT and what it actually collects is 30% in 2023, far above Poland (16%), Hungary (7.4%), Bulgaria (8.6%) and the EU27 average (9.5%), according to an analysis carried out by Monitorul Social, a project of the Friedrich Ebert Romania foundation, based on data provided by Eurostat.
According to her, our country not only has the largest budget deficit in the EU, but also one of the lowest rates of budget receipts in the EU, as a percentage of GDP, being exceeded only by Ireland. This massive gap erodes the budget revenue base, limiting the state's ability to finance essential areas such as education, health and defence.
“Romania's situation contrasts strongly with the EU27 average, where the VAT gap is decreasing to 9.5% from 11.1% in recent years, while in Romania it has not fallen below 29%. Reducing the gap from 30% to 9.5%, which is the EU27 average, would bring 1.4% of GDP additional revenue, enough to cover the difference between Romania's spending on education and the European average, more than half of the difference compared to EU27 allocations for health, or almost doubling the Romanian defense budget. Full VAT collection would increase collection by 2% of GDP, comparable to the national budget for education and more than that for defense in 2023“, the analysis shows.
This difference perpetuates a vicious circle: budget receipts far below potential, record budget deficits of 6.6% in 2023 and 9.3% in 2024, the imposition of austerity measures that affect low-income citizens, and the inability of the state to finance public services at optimal levels.
The impact on the public budget is major, as closing the gap up to the level of EU collection on expenses from 2023 would generate more money than all the austerity measures adopted by the Bologna Government, according to the estimate of the Fiscal Council from October 2025. This would bring Romania's budget deficit close to the level of Poland and France.
“This problem can only be overcome through coordinated interventions in tax collection, digitalization of ANAF and a tax compliance strategy with clear targets. In 2000-2010, Bulgaria was in an even worse situation than Romania in terms of VAT collection. Today, its VAT gap has decreased to 4.9%, below the EU average and almost 10 times lower than Romania's. By adopting similar measures, ROman could significantly increase its VAT receipts in the coming years, thus avoiding further shock austerity measures and an alignment with European spending standards for Education, Health or even Defense“, according to the cited document.
