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Areas of Strength
- Luxembourg reports annually on tax expenditures (TEs) and prepares multi-annual financial programmes. This provides greater transparency and predictability on public finances and their evolution. Luxembourg also reports an annual list of TEs and their estimated nominal values. In 2025, TEs in Luxembourg amount to 2% of GDP (EUR 1 714 million). Moreover, based on simulations, Luxembourg’s tax expenditures raise disposable income for households and, to an extent, reduce inequality.
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Areas of Strength
- The burden of tax compliance is relatively low in Lithuania, while revenue has been growing robustly. CIT and average estimated tax compliance costs are below the EU average, including for small and medium-sized enterprises (SMEs). VAT compliance costs are slightly above the EU average, although the VAT registration process is relatively efficient. Fewer Lithuanian firms considered business regulations to be an investment impediment than the EU average in 2023. At 3.8% of total revenue collected in 2023, tax arrears are well below the EU average and have fallen.
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Areas of Strength
- Latvia assesses various tax gaps and seems to follow up to reduce those. Latvia estimates the personal income tax (PIT) gap and social security contribution gap for the undeclared wages component (payroll taxes), and provides data on the VAT gap. In contrast to most EU countries active in the area of tax gap estimation, it publishes most of its tax gap estimates. Next to tax gap analyses, Latvia also assesses and monitors the size of its informal economy. Latvia has also laid out a detailed action plan with the aim to reduce the shadow economy by 1 percentage point of GDP by 2027.
- Latvia has made significant improvements in reducing the VAT compliance gap. The VAT compliance gap has been reduced from 12% of the VAT Total Tax Liability in 2020 to 5% in 2023 and appears to remain at a similar level in 2024.
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Areas of Strength
- Italy has made important steps with respect to the digitalisation of the whole tax administration, with high adaption rates for the digital indicators and the existence of a digital transformation strategy facilitating also the interaction with the taxpayer. Furthermore, the tax administration has put in place systems allowing for the use of artificial intelligence to analyse and cross-reference a wide range of taxpayer financial data. Altogether, these improvements have proved beneficial to the overall tax compliance environment.
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Areas of Strength
- Ireland reports a high level of tax compliance, as evidenced by having one of the lowest levels of tax arrears in the EU. This is supported by efficient IT systems and a centralised recovery process led by the Irish Tax and Customs Administration (The Revenue Commissioners). Key recovery tools include Phased Payment Arrangements (PPAs), third-party payment redirection, court judgements, and the use of government-appointed Sheriffs, with a strong emphasis on early taxpayer engagement to resolve payment difficulties. A daily interest charge on late payments reinforces timely compliance.
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Areas of Strength
- Hungary continues to invest into the digitalisation of its tax administration. Structural reforms are ongoing with a comprehensive digital transformation strategy, including the development of a data asset management system. The authority has been using machinelearning algorithms and has been further rolling out the use of AI from data governance processes to data analytics. Hungary has high e-filing rates for VAT, PIT, and CIT returns. In addition, the Hungarian tax administration provides a variety of additional online tools and services to taxpayers reducing compliance costs.
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Areas of Strength
- Widespread use of innovative digital solutions to combat tax fraud and evasion. Greece has in recent years deployed a digitalisation strategy in the tax administration with a wide range of tools that are recognised as best practices. These include the establishment of myDATA system (businesses must send invoices digitally to the tax administration) for realtime checks and fraud detection, electronic book-keeping and E-Invoicing, automated audits (for example Airbnb transactions are monitored using smart tools to spot undeclared income). These are complemented by more creative digital tools such as the ‘E-appodixi Application’, where citizens can verify receipts, report tax violations (anonymously or named), and earn up to EUR 3 000 for confirmed reports. There is also an AI model for geo-locating swimming pools that have not been declared for tax obligations.
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Areas of Strength
- France’s tax collection and recovery system has improved thanks notably to the intensification of enforcement actions and the integration of digital tools. In terms of VAT collection, France has developed a digital transformation strategy in recent years, improving IT tools in the tax registration, assessment and collection.
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Areas of Strength
- Estimates of the corporate income tax (‘CIT’) gap and the shadow economy indicate that Germany’s corporate income tax (‘CIT’) gap and its shadow economy are smaller than the EU average. Commission estimates suggest a relatively small CIT tax gap of 7.6%, and the size of the shadow economy is estimated at 8.8%, below the EU average of 17.6%. In addition, Germany’s VAT compliance gap is close to the EU average. Germany generally performs well in VAT administration, although some processes could be simplified.
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Areas of Strength
- Finland has one of the lowest value added tax (VAT) compliance gaps in the EU. The VAT compliance gap is estimated at 3% of the VAT Total Tax Liability (VTTL), compared to an EU average of 9.5%. Between 2019 to 2023, Finland’s VAT compliance gap has trended downward. Low compliance gaps are a reflection of overall high tax morale in Finnish society.
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