Auditors accuse tax authority of series of errors

11-02-2019

The Supreme Audit Office has highlighted a requirement imposed on corporate tax payers that may serve no purpose. For its part, the country’s tax authority says the regulation was carefully considered. However, auditors have also accused tax collectors of other errors.

Illustrative photo: Tomáš AdamecIllustrative photo: Tomáš Adamec Recently inspectors from the Supreme Audit Authority turned their attentions to the running of the Czech Republic’s corporate tax system from 2013 to 2016.

The auditors identified as a potential risk tax evasion via what they refer to as “connected persons”. This actually means firms with addresses in tax havens.

The Financial Administration is the Czech Republic’s tax collection agency. In order, it said, to acquire data that could help uncover tax evasion, it introduced a new rule for payers of corporate tax in 2014.

It obliges them to include in their tax returns a supplement listing transactions with such “connected persons”.

However, the Supreme Audit Authority questioned the requirement on Monday.

The tax authorities never carried out an analysis of whether it would actually help stem tax evasion, it said.

The other alternative is that the obligation – which affected 14,500 companies in 2016 – is pointless red tape.

The Financial Administration rejects this assertion, insisting that it consulted the matter with experts and stakeholders.

On top of this, between 2013 and 2016 the tax authority had to return CZK 180 million due to the miscalculation of taxes, the Supreme Audit Office said. Around a third was interest and therefore a cost to the state.

However, a spokesperson for the tax authority, Petr Habán, says the figures involved were infinitesimal compared to the CZK 550 billion-plus collected across the period in question.

“In percentage terms, the mistakes made by the Financial Administration, compared to the taxes collected, amount to only three tenths of one percent. This is a very low level of error that, if anything, attests to the good work of the Financial Administration in a legislative environment that changes very dynamically.”

Supreme Audit Office, photo: Tomáš AdamecSupreme Audit Office, photo: Tomáš Adamec Controllers also said there was another area in which the tax authority fell down: crown bonds.

Václav Kešner is a spokesman for the Supreme Audit Office.

“It was not until 2017 that the Financial Authority began looking into their possible misuse. Previously it had not identified them as a risk area. The Financial Authority didn’t begin controlling crown bonds until 2017 – and the result was the deadline for calculating tax expired in the case of at least 15 verified subjects.”

Crown bonds made the headlines in 2017 after then finance minister (and now prime minister) Andrej Babiš purchased CZK 1.5 billion worth. He was investigated over not paying tax on them, but the matter was shelved by detectives.

However, the issue was one reason the then prime minister dismissed Mr. Babiš from his cabinet.

11-02-2019