Not too long ago, a blogger suggested that an increase in the VAT rates would not generate the expected tax revenue because of tax fraud. As I had no clue on the real severity of VAT tax evasion in Portugal, I had to spend sometime documenting myself.
Well, according to this study commissioned by the European Commission, Portugal behaves quite well with a VAT gap of 4%. The VAT gap (the gap between actual and theoretical revenues) is not a direct measure of fraud, just an upper bound. For details I defer the interested reader to the report that covers the period 2000-2006. The time series dimension is of some interest as it is probable that the gap increases during recessions. In any case, international markets should welcome Portuguese diligence.