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Czech Budget Watchdog Slams Tax Administration

by Ulrika Lomas, Tax-News.com, Brussels

21 August 2017


The personal income tax code of the Czech Republic has become increasingly complex, with the Government often failing to consider the full outcome of legislative changes to the tax system, according to the country's Supreme Audit Office.

In a new report, the Supreme Audit Office, an independent constitutional body established to monitor the state budget, focused on the management of the personal income tax law for the period 2012 to 2015 to establish whether the tax authorities had acted under the law. It found that the Income Tax Act has become increasingly complex, with a growing number of exceptions, deductions, and rebates "complicating tax administration, increasing the administrative burden on taxpayers and administrators."

"The growing number of deductible items and tax rebates... have had a negative impact on the complexity of tax administration," the office observed in a statement on August 21.

The report also found that the Ministry of Finance had failed to fully analyze the effects of recent changes to the tax code.

"Given that such adjustments may affect up to about four and a half million individuals and more than 350,000 employers and [that] any further adjustment may further increase the administrative burden, it would be desirable to evaluate the impact of each change," the auditors said.

The report also noted flaws in the electronic filing system for personal income tax payers, which does not have a mechanism to notify taxpayers of inaccurate tax returns. Consequently, in cases where tax returns need correcting, taxpayers rely on being contacted by tax authority staff. However, this does not always happen, leading to many taxpayers being fined before they have an opportunity to correct their tax returns.

The audit office examined a sample of 141 rejected tax returns, finding that in eight cases the tax authorities fined taxpayers after failing to notify them of errors on their tax return. The report said that such actions "violate the law."

"If the system responded automatically, the risk of such errors would be reduced. In addition, this practice raises the administrative burden and runs counter to the principles of digitalization of public administration, which is to reduce costs and improve public communication with the authorities," the audit office said.

TAGS: individuals | Finance | tax | law | budget | audit | tax authority | Czech Republic | Tax

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