Unpaid taxes increased by one third within three years; companies mostly owe VAT
Press Release – February 3, 2014
The Supreme Audit Office performed an audit, which aimed at unpaid taxes and their collection within the period 2011–2012.
From the end of 2010 till the end of 2012, tax underpayments amounted from CZK 106,400 million to CZK 134,700 million (=by 27 %). In the end of 2012, revenue authorities wrote off uncollectible taxes in the amount of CZK 124,000 million. The biggest share of underpayments made unpaid VAT, as the unpaid amounts increased from CZK 57,300 million to CZK 82,500 million within the period 2010–2012.
In the end of April 2013, revenue authorities kept files of 77 tax debtors who each owed VAT payments exceeding CZK 100 million. These subjects owed VAT payments in the total amount of CZK 25,700 million, which made one third of VAT underpayments. Out of the excessive VAT debtors, forty-five only have virtual addresses or do not reside at addresses given in the Commercial Register, so there is no chance to contact them.
Auditors also scrutinized the collection of unpaid taxes. By the end of 2012, revenue authorities were demanding tax underpayments in the amount of CZK 98,800 million. From 2010 to 2012, the authorities collected underpayments in the amount of CZK 22,100 million – including the consensual payments. On average, the authorities succeeded to collect 8.8 % of the demanded unpaid taxes. Most cases of the underpayments involved executions of the debtors’ accounts. In the two years following 2010, there was a noticeable decrease of returns from executions of movable properties and estates. Among the reasons of the decrease were the movables’ low values and the disinterest of the public. With the estates, the usual reason of the decrease was mortgage rights of other creditors.
The low effect of collection processes is influenced by the fact that the excessive tax debtors are goal-directed juridical persons, with whom it is not possible to even start the collection processes. Many measurements were taken to prevent tax evasion and to make the collection of unpaid taxes more efficient, but these measurements only brought minor effects.
The audit report pointed out that decreasing numbers of employees at revenue authorities could also have a negative impact on collection of unpaid taxes. On average, each employee was in charge of some 600 debtors, while in Prague 1 and Prague 4, each employee was in charge of three times as much of debtors. As it is essential to start the collection processes as soon as possible and the processes should not get prolonged, the General Financial Directorate launched a pilot project on July 1, 2013, which aims at acceleration of collection processes.
Because the biggest share of unpaid taxes was made by VAT underpayments, the SAO has decided to aim at VAT during the auditing operation No. 14/17, which is about to start in May.
For further details about auditing operation No. 13/02 (in Czech only), see the following link: http://www.nku.cz/assets/media/informace-13-02.pdf (pdf 438 kB).
Communication Department
Supreme Audit Office