2021 as seen by financial administration
The yearbook titled Information on the Financial Administration's Activity once again provides interesting insight into the activities of the tax authorities. Did you know that the number of completed procedures to remove doubt and tax inspections has decreased by more than one third over the last two years?
The yearbook provides statistical data for the last year, an evaluation of the past year, and an outlook for the future. In 2021, the Ministry of Finance completed the MOJE daně project, enabling taxpayers to communicate more easily with the tax authorities via the internet. The whole of 2021 was marked by the COVID-19 pandemic; consequently, the financial administration paid out over CZK 19 billion under the compensation bonus programme.
Tax collection increased slightly
Compared to 2020, tax revenues increased marginally. Total tax collected amounted to nearly CZK 866 billion, which is a year-on-year increase of 1.8%. The largest share of the state budget revenue was again value added tax (CZK 461 billion), whose collection increased by 8.7% year-on-year. The highest increase in the amount of collected tax, of a full 67.9%, relates to tax on the income of individuals filing tax returns. The collection of corporate income tax increased by more than 25%. The financial administration attributes this increase in corporate income tax to a sharp reduction in requests for changes in the amount of income tax prepayments and the absence of general pardons. By contrast, the sharp decline (over 32%) in the collection of income tax on employment was largely due to the abolition of the super gross wage and an increase in the basic tax relief per taxpayer.
Fewer tax inspections but more additionally assessed taxes
The financial administration attributes the continued decline in inspection activity to the prolonged unfavourable situation caused by the COVID-19 pandemic, as various anti-epidemic measures had a significant impact on the length of inspection procedures. In 2021, the financial administration's staff carried out a total of 12,343 procedures to remove doubt and 6,534 tax inspections. The total amount of additionally assessed tax was just under CZK 6.15 billion, which represents a year-on-year increase of approximately CZK 201 million, despite the decrease in the number of tax inspections. The procedures to remove doubt resulted mainly in the assessment of VAT, namely CZK 1.3 billion to increase VAT liabilities and almost CZK 2 billion to reduce excess VAT deductions. Tax inspections mainly focused on transfer pricing, one-crown bonds, and the investigation of taxable entities involved in chain fraud.
With the cancellation of anti-epidemic measures, we are seeing a renewed increase in the number of initiated inspection procedures.
Fewer appellate and court proceedings
There was also a slight decline in the number of appellate and court proceedings. In 2021, over 4,500 new appeals were filed by taxable entities. In total, 6,057 cases were dealt with during the year; 990 of which were upheld by first-instance tax administrators, and another 1,086 were fully upheld by the Appellate Financial Directorate. As every year, most of the appeals concerned value added tax. The regional courts ruled on 1,004 cases; in 258 cases they ruled with the taxpayer, involving a total of CZK 2,303 million this year. At the end of the year, 1,287 cases were pending and 766 cases were awaiting a decision by the Supreme Administrative Court.
Increase in interest paid by the tax authorities
2021 saw a significant increase in the total amount of interest paid by the tax authorities to taxpayers as compensation for incorrect decisions, late refunds of overpayments, or lengthy examinations of deductions. In total, almost CZK 2.8 billion was charged to taxpayers, representing a year-on-year increase of 18.5%.
And what will this year bring?
The financial administration is planning to implement additional measures to support digitisation, communication with the public, and tax payment simplification. The MOJE daně portal should be further modernised to make it as responsive as possible to the needs and demands of taxpayers. Furthermore, the financial administration intends to focus on improving the efficiency of tax collection and recovery of tax underpayments, as well as on further inspections of taxable entities, especially concerning transfer pricing and tax fraud.