The collection of property taxes three times less effective than other taxes
PRESS RELEASE on Audit No. 15/15 – March 21, 2016
The Supreme Audit Office (SAO) performed an audit at the General Financial Directorate and several regional financial authorities1 and scrutinized the collection of property taxes in the period from 2012 to 2014. The auditors concluded that the biggest problem was high amount of outstanding payments.
Payments of property taxes amounted to CZK 59,000 million in the period 2012–2014. In 2014, financial authorities collected CZK 19,300 million but outstanding payments for the same year amounted to CZK 3,400 million in total. The biggest problem is related to the tax on property transfers: the revenues amounted to CZK 9,300 million but the outstanding payments made CZK 2,300 million in 2014.
The recovery of property tax claims is significantly influenced by small outstanding payments (less than CZK 5,000). In the end of 2014, the audited financial authorities kept records of 105,000 outstanding payments, out of which more than three quarters were small claims. These small claims made only 4 % from the total amount of recorded outstanding payments (CZK 1,700 million). It will be even more difficult to collect these claims in the future because the General Financial Directorate prolonged the recovery period in November 2015. As a result, authorities may start to recover their claims as late as 33 months after the claims arise.
The audit also revealed that the collection of property taxes is three times less effective than with other taxes. In 2014, only about CZK 25 was collected for 1 CZK spent on tax administration procedures, while the collected amount is three times higher when other taxes are collected. The successful collection of taxes is mostly influenced by the tax base and tax exemption levels.
The SAO concluded that the administration of property taxes had been without serious errors and conditions for the collection of property taxes considerably improved thanks to the new system, which allowed automatic exchange of information among financial authorities and cadastre offices.
According to the Organisation for Economic Co-operation and Development (OECD), revenues arising from the collection of property taxes made 1.38 % of all tax payments in 2013. In the Czech Republic, the proportion of property tax revenues in the total tax revenues is the second lowest when compared with other 21 EU Member States. Property tax revenues did not change much even after the introduction of legal amendments that were effective since 2014.
Supreme Audit Office
1] Regional financial authorities in Central Bohemia, South Bohemia, Plzeň, Ústí nad Labem, South Moravia, and Moravia-Silesia.