The VAT gap, namely the difference between expected VAT revenues and what is actually collected, narrowed by 12.6% in 2023 compared with 2019. Exemptions and reduced rates shrink the VAT baseIOBE points to the extensive use of exemptions and reduced VAT rates as a major source of lost revenue. Estonia raised its standard VAT rate from 22% to 24% in July 2025. Elsewhere, Lithuania broadened its VAT base by shifting some goods from a 9% reduced rate to 12%, reversing earlier policy changes. Finland lowered its reduced rate slightly to 13.5%, widening the gap with its high standard rate, while Romania raised its standard VAT rate to 21% in August 2025 and merged its lower reduced rates into a single 11% tier.