The SAO assesses the functioning of the Czech Republic in its Annual Report. The state is ‘blocked’ and got stuck in many areas

Press release — 1 April 2019

The Supreme Audit Office issued its Annual Report 2018, which not only summarises its findings from audits, but also assesses the state’s approach in selected policies and fields of management. A significant part is devoted to the comparison of the Czech Republic with other countries. In the Report, the SAO points out in specific areas that the public sector in the Czech Republic has failed to respond adequately to the dynamic changes and challenges faced by the society, be it computerization, simplification of tax obligations, energy savings, social housing, and transport. Although significant resources are invested by the state in these areas, it does not receive what it is expecting.

“The first condition to find a solution is to be aware of the gravity of the situation. We now have a “blocked” state which is not able to cope with a number of problems. The necessity and effectiveness of government regulation must be assessed. We should also look at the legal framework and its efficiency in resolving disputes, design government interventions with regard to cost/benefit ratios,” says Miloslav Kala, President of the SAO.

According to the SAO, necessary reforms are still being delayed in a number of areas. For example, companies need about 40 per cent more time than the average of EU countries and the European Free Trade Association to meet their tax obligations, namely 230 hours. Some measures put in place by the state to combat tax evasion have by contrast increased the administration burden. Even though, e.g., control reports are electronic, the time for the administration of the VAT liability of VAT payers increased by 14 hours.

The Czech Republic is also, according to the SAO, lagging far behind in the development of online services of the state. It is failing to correct the IT situation, which not only protracts the computerization of the state but also makes it more expensive. Governance in this area lacks any concept, it lacks staff capacity and the state is thus often dependent on external suppliers. The SAO has repeatedly drawn attention to this issue. In the development of e-Government, the Czech Republic continues to significantly lag behind in comparison with the EU countries. According to the European Commission, the level of online contact between public authorities and citizens is one of the lowest in the EU, ranking the 22nd place.

In the long term, there has been a failure to change the state of infrastructure development, whether it involves building roads or rail transport. This has also a negative impact on the country’s competitiveness. According to the World Economic Forum 2018 report, the Czech Republic ranks 68th in the quality of roads from 140 countries. In the EU, the Czech Republic has reached the 23rd place. While in some neighbouring countries it takes 5 years to prepare the construction of infrastructure buildings, it takes 13 years or more in the Czech Republic.

Investors are confronted with a multitude of uncoordinated laws, officials are motivated to extensively interpret the law, and the process of deliberations is still dragging on. The SAO has repeatedly pointed out problems in the construction of roads and motorways, such as inefficient processes in the preparation of buildings and also the complexity and time required for the legislative process. Only the amendment to the Act on the Acceleration of Infrastructure Construction Works lasted four years to be approved.

The state should also better fulfil its role in terms of housing policy and defining social housing. To support housing as one of the most basic needs of citizens, the state has invested a total of CZK 232 billion from 1997 to 2017. However, despite such a number of funds, the SAO found that the situation had been deteriorating in some areas. For example, the number and population of socially excluded localities has been rising. In addition, there is still no law on social housing in the Czech Republic and its adoption is constantly postponed. According to the SAO, there is a risk that access to housing for different vulnerable population groups will continue to deteriorate.

The state has also invested substantial investments to the improvement of the environment, unfortunately, it has not fulfilled the objectives it had set itself either. For example, the rate of reduction of the main harmful substances in the air is slowing down. According to the European Environment Agency, the Czech Republic occupies the 8th position. As for particulate matter PM10, the Czech Republic belongs to European countries with poorer air quality. The Czech Republic cannot meet its targets in energy savings, too. It is the third most energy-intensive countries in the EU; the energy intensity here is more than twice as big as the EU average. Despite the funds invested, by 2017 the Czech Republic had met only 1 % of the savings planned for 2020.

These and other areas also show that the state is not in a position to respond properly to dynamic changes in the society. The existing structure and processes affect the whole national administration in its poor performance. The low quality of management and control by the responsible authorities is also a common weakness.

Communication Department
Supreme Audit Office

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