Value Added Tax and Exercise Taxes
The present document provides information on the execution and results of parallel audits conducted by the Supreme Audit Office of the Czech Republic and the Supreme Audit Office of the Slovak Republic, which were both focused on the area of administration of value-added tax and excise taxes.
The cooperation between the two supreme audit institutions of the two countries is based on the Agreement on Audit Cooperation, signed in February 2004.
The topic of the parallel audits was chosen with a view to the fact that indirect taxes constitute very substantial revenue of the state budgets of both countries. The value-added tax structure, which allows for a refund of an excessive tax deduction, provides room for tax frauds and tax evasion. High excise tax rates, particularly those applying to tobacco and tobacco products, spirits and mineral oils, bring high profits to those who can dodge them by selling the commodities listed above illegally.
The Czech and Slovak Supreme Audit Office’s have established, inter alia, the following facts:
- Business transactions were not declared in the same way in both countries, which made corresponding exports and imports difficult to identify in the Czech and Slovak Customs Databases,
- Data entry errors in the above-mentioned customs databases made it impossible to identify some import and export transactions,
- Some exports from the Czech Republic failed to find and verify appropriate matching imports in the Slovak Repub1ic. Insofar as these cases are concerned, there exists a justified suspicion of fictitious exports for the purpose of illegally claiming a value-added tax return.
- Taxpaying entities failed to comply with certain Iegal obligations pertaining to reporting of exports and imports in value-added tax retum forms,
- Shortfalls and deficiencies were identified in the administration of value-added tax and excise taxes by Tax Offices and in their coordination with customs offices.