2024-07-18 04:39:59
With the abolition of the electronic record of sales (EET) in 2023, the authorities lost one of the tools for the targeted examination of tax evasion. In the case of VAT, it was mainly about detecting entities that did not register as payers, even though they exceeded the legal limit for mandatory registration. This was stated by the Supreme Audit Office in an audit report focused on the money the state spent on measures against tax evasion.
According to the Ministry of Finance, it was a disproportionately expensive tool that cost taxpayers over two billion crowns, and its costs would continue to increase over the years. In addition, according to the ministry, the financial benefit is questionable.
In 2016, the state introduced two tools against tax evasion. The first was the inspection report and the second was the EET. However, sales records were suspended from spring 2020 due to the covid pandemic until the end of 2022 and became de facto voluntary. From January 2023, the law then abolished it.
“Already in 2022, when the government decided to cancel it, it was clearly stated by the Ministry of Finance that even though it will be the loss of one of a number of control tools, it is a financially efficient solution from the point of view of public budgets,” the Ministry of Finance said in response to Monday’s control conclusion. He considers the budgetary benefit mentioned in the office’s report to be questionable. According to the ministry, it is likely that over the years the benefit of EET would be close to zero, or even negative, mainly due to the decline in cash transactions, of which, according to estimates, only about a fifth should be compared to cashless payments in 2025.
The Supreme Audit Office states that the Financial Administration has detected over ten million risky transactions through audit reports over the course of six years. It reached almost 11 billion crowns in VAT. The General Financial Directorate spent a total of 257.6 million crowns between 2015 and 2022 on the system of control reports that must be submitted by VAT payers. The control authority evaluated this money as purposefully spent. Among the most frequent findings was the application of VAT deduction from fictitious invoices. In a number of cases, entrepreneurs also did not prove that they used the purchases of goods or services for their economic activity.
Through EET, the financial administration collected 652 million crowns in income taxes and VAT between 2017 and 2019. “With the subsequent cancellation of the EET in January 2023, tax administrators lost one of the important tools for targeted tax evasion screening, in the case of VAT, for detecting tax subjects who did not register for VAT, even though they exceeded the legal limit for mandatory registration,” the office’s report states. Originally, this limit was one million crowns, but since last year it has increased to two million crowns.
Between 2017 and 2022, the Financial Administration, using data from the EET, registered 7,167 tax entities for VAT that exceeded the legal limit. Between 2017 and 2019, there were an average of 2,076 subjects per year. After the suspension of EET in 2021 and 2022, the number of new registrations dropped to only about 20 per year. The Ministry of Finance, the General Directorate of Finance and the General Directorate of Customs spent a total of 2.24 billion crowns on the introduction and operation of EET between 2015 and 2023, the Supreme Audit Office said. Of the total number of tax entities registered with the EET, more than 50 percent were VAT payers.
The Ministry of Finance added that as the proportion of cash payments targeted by the EET decreases, the utility of this tool in detecting tax evasion would also decrease. “As a tax administrator, the state has a number of other tools to effectively combat these evasions, whether they are, for example, control reports or analytical and search activities,” the Ministry of Finance said.
In response to Monday’s report by the Supreme Audit Office, the shadow prime minister of the ANO movement Karel Havlíček described the current government’s decision to abolish EET as a criminal act. According to him, this step robbed the state and decent companies. In the event of its return to the government, the ANO movement wants to restore the records of sales in a modified form.