Blacklist of tax offenders rejigged after previous model proves ineffective

Under new legislation Czech entrepreneurs and firms suspected of not paying their taxes are liable to find their names on a tax authority blacklist. Those given the “unreliable person” label may find it harder to do business, iHned.cz reported.

Photo: Tomáš AdamecPhoto: Tomáš Adamec The blacklist is part of a bundle of provisions contained in an amendment to the law on taxation rubberstamped by the Chamber of Deputies last week.

The idea of a register of suspicious names is nothing new. Indeed, the Financial Administration, the national tax collection body, has been operating a list of so-called unreliable value added tax payees for a number of years.

However, that list has not proven very successful, with businesspeople easily able to evade inclusion. All it took was cancelling one’s registration as a VAT payee and then immediately acquiring a fresh one.

Those who failed to fulfill their obligations as value added tax payees disappeared from the system, deputy finance minister Alena Schillerová told iHned.cz. Once they registered again they returned completely spotless, she said.

That is now set to change. Under the new set-up, the Financial Authority will no longer list unreliable VAT payees by tax identification number. Instead, the concrete names of individuals and firms will be there in black and white.

Alongside those who don’t pay their taxes, the new blacklist will feature those who have appeared on the previous unreliables list and applied to have their VAT registration abolished.

The Ministry of Finance says the novel approach comes in a response to the fact that there is no way of limiting entrepreneurs when it comes to so-called VAT re-registration, iHned.cz said.

The Financial Administration would be able to reject the cancellation of registration only if it had evidence from the very outset that it was a calculated cancellation accompanied by a plan to subsequently register again, Ministry of Finance spokesperson Kateřina Vaidišová told the business news website.

Entrepreneurs may also find themselves on the new model list of unreliable persons if they don’t pay their taxes on time.

Appearing on the list could have a marked negative impact on a business, Jaroslava Hanková of tax consultants Apogeo told iHned.cz. One example of this may be in trying to find new business partners.

But, businesspeople will be glad to know, there is a way off the list. If a VAT payee keeps their nose clean and fulfills all their tax obligations for 12 months they will be removed from the register, iHned.cz said.