Current Affairs Prime minister unveils plans to fight tax fraud
Improved tax collection is one of the mainstays of the new centre-left government’s policy programme and many of its promises of improved social welfare hang on its ability to fill state coffers by successfully fighting tax fraud. At the weekend, the prime minister unveiled a series of measures in the pipeline.
Every year the Czech Republic loses approximately 150 billion crowns through tax evasion and previous attempts to curb those losses have proved less than successful. Now the centre-left coalition government headed by Bohuslav Sobotka says it is determined to succeed where others have failed. Mr. Sobotka on Sunday outlined a series of measures which should shore up the tax system against the massive drain.
And the prime minister has not had to look far for inspiration. Following last week’s visit to neighbouring Slovakia, he announced the decision to re-establish a special financial police unit to fight tax evasion - something along the lines of Slovakia’s Cobra tax inspection team which uncovered tax fraud amounting to 94.2 million euros last year alone.
“We would like to put together a Cobra team of our own, which would naturally require close cooperation between the police, the tax and customs authorities and the finance ministry. The preparations should be completed this year so that the team can swing into action as of 2015.”
A number of new laws aimed at improving tax collection should also take effect as of next year, among them a law on declaring the origin of property and a law reducing the limit on cash payments. An even more effective tool in this respect, according to the prime minister, should be the introduction of electronic registers of cash payments – a new generation of automatic cash registers which would be linked to a central data base at the finance ministry monitoring all transactions made at cash register terminals around the country. However the system is costly and complicated to introduce and would not be in operation until 2017. In the meantime the authorities want to launch a receipt lottery in order to encourage consumers’ assistance in fighting tax evasion.
This is similar to a plan approved by the Portuguese government last week to fight tax evasion. Portugal is setting up a lottery for people who insist on getting proper receipts for purchases. Called Factura da Sorte or "lucky receipt" the scheme will provide coupons along with receipts. These coupons will act as lottery tickets in a draw that will dole out up to 60 cars to winners each year.
If the Czech measures against tax evasion are effective the prime minister said that the lower VAT rate, now at 15 percent, could be further reduced at the end of the government’s election term. On the other hand, if they should fail the government may well have to review the question of raising corporate taxes next year to provide the funds needed to fulfil the government’s policy programme. With that in mind, no one will try harder than finance minister Andrej Babiš to make it work since he has stated from the outset that he is dead set against the idea of tax hikes.