Unfinished single collection point project aiming at simple collection of taxes, customs duties, and social and health insurance cost CZK 3500 million
PRESS RELEASE on Audit No. 15/17 – July 11, 2016
The Supreme Audit Office scrutinized the project that aimed at the development of a single collection point in order to simplify and make more effective the collection of taxes, duties, and insurance payments. Tax payers were supposed to make their payments at one account using a single form and communicate with one authority instead of the former five ones1. The Project was approved by the Government in 2008 with planned launching in the beginning of 2014. The launching term was later postponed by one year. In spite of the utilized funds in the amount of CZK 3,500 million, which were spent by the General Financial Directorate, the Ministry of Finance, and the Czech Customs Administration, the single collection point has not been fully functional and the payments have not become simpler. In 2014, the Government decided not to continue in the Project’s implementation.
The General Financial Directorate, the Ministry of Finance, and the Czech Customs Administration spent nearly CZK 3,500 million on the Project in the period from 2009 to 2015. Auditors scrutinized funds in the amount of CZK 2,600 million and revealed that funds were utilised on expenses which were not related to the development of a single collection point and without the approval of the Project’s management. Over 80 % of the amount was used by the General Financial Directorate and its current expenditures linked to purchases, renewals, and maintenance of ICT, employees’ wages and bonuses, purchases of company cars, and purchases and reconstructions of buildings, where financial authorities are located. The Czech Customs Administration used the funds for purchases of uniforms and X-ray equipment repairs. The informational system of the single collection point, which would connect individual tax and insurance administrators’ informational systems has not been developed at all. The Project’s management did not ask the Ministry of Finance or the General Financial Directorate to issue a call for tenders, and there is no complete design of the said system’s architecture.
The Project was managed by a board and a steering committee. The Board consisted of Minister of Finance, Minister of Labour, and Minister of Health. The Steering Committee was composed of representatives of the ministries. During the SAO’s audit, it was not clear who sat on the Committee, because the list of its members provided by the Ministry included people who were not any longer employed at the said ministries. The SAO concluded that the Project’s management did not comply with the obligations, did not report to the Government, or supervise the Project. During the seven years’ period, the Board (the Project’s highest supervisor) met only three times, and the Committee met only 15 times, which negatively impacted the Project’s implementation.
Administrators of taxes, customs, and insurance payments record the data separately. For example, there are three individual data registers of one million self-employed. Other activities are recorded in multiple registries, for instance debtors’ assets or executions. Auditors also criticized the fact that each administrator has an individual software provider and sometimes does not own the copyrights.
For at least 10 years, the European Commission has been annually pointing out that it is necessary to simplify the tax collection in the Czech Republic. According to the World Bank, the tax administration processes took 405 hours in 2014, which is the second longest period in Europe (after Bulgaria). On average, the administration of taxes takes 184 hours in 22 European countries, which integrated the tax collection, and for example in Ireland, it is only 82 hours.
The Project was ambitious as none of EU Member States has such an integrated collection of revenues. For example, only tax and insurance collections were integrated in Bulgaria, while in Slovakia taxes and customs duties were integrated and insurance payments are collected separately. Already in 2008, the World Bank warned the Czech Government of risks related to the development of a single collection point and a year later recommended to establish a special authority to supervise the Project’s implementation so that it was clear where responsibility rested. The Czech Government or the Ministry of Finance did not comply with these recommendations.
Supreme Audit Office
1] Financial Administration, Customs Office, Czech Social Security Administration, a health insurance company, and an accident insurance company (in case of an occupational accidents).