Prague - Companies in the Czech Republic owed Kc134.7bn in taxes at the end of 2012, which was 27 percent more than two years earlier, according to findings of the Supreme Audit Office (NKU) made public in a press release today.
The volume of tax arrears grew mainly owing to arrears in value added tax (VAT) which rose from Kc57.3bn to Kc82.5bn in the monitored period, the NKU said.
The collection of tax arrears is being complicated by a falling number of tax offices' employees as well as by special purpose vehicles, the NKU said.
Special purpose vehicles are the biggest defaulters and the collection of arrears from these companies cannot even be started, according to the NKU.
"It is a permanent situation which has not changed even after the introduction of a number of measures aiming to prevent tax evasion and make the collection of tax arrears more effective," NKU inspectors said.
The collection of tax arrears is "almost impossible" from indebted companies whose founders wind up business activities, do not pay debts and continue in the same activity in newly established entities, from companies whose statutory body is not functional or companies that are not seated at their registered address or are seated at the so-called virtual address, and from companies that change their seat or want to enrich themselves through fraud by making out invoices for non-existent amounts of money, for example.
Businesses that are in reality shell companies are the main problem when collecting tax arrears, daily Hospodarske noviny (HN) said today, referring to the same NKU report.
From almost 80 big VAT defaulters, more than a half are untraceable shell companies which have failed to pay almost Kc16bn in tax, HN said.
According to the NKU report, 77 companies with VAT arrears of over Kc100m owed Kc25.7bn in total at end-April last year. Forty-five of these firms were shell companies with VAT arrears worth the mentioned amount of almost Kc16bn.
The NKU also said that the number of tax offices' employees collecting tax arrears is falling despite the rising volume of the arrears.
There are about 600 debtors per one employee at the checked territorial branches of tax offices. The number of debtors in the Prague-1 and Prague-4 districts is even three times higher, according to the NKU.
The Financial Administration has confirmed that lack of staff in relation to the number of debtors, the volume of tax arrears and a growth in the volume of administrative work is one of the factors that negatively influence the collection of tax arrears, according to the NKU.
Among the external factors influencing the collection of tax arrears are also frequent changes in legislation, NKU inspectors said.
In contrast, a timely start of arrears collection has a positive influence on the outcome of the collection.
"The sooner the tax authority starts to exact the unpaid tax, the more successful it is in collecting it," the NKU said.
The Financial Administration collected Kc22.1bn, including voluntary payments, in arrears in the 2010-2012 period, which means it managed to collect 8.8 percent of exacted tax arrears on average, according to the NKU's data.