Value Added Tax Administration
Press release on completion of the auditing operation No. 05/19
The auditing operation was focused on financial offices dealing with administration of value added tax (VAT) after accession of the Czech Republic to the European Union in connection with adoption of the Act No. 235/2004 Coll. on value added tax. There it was also studied usage of the VAT Information Exchange System (VIES). This system was implemented in the EU due to control of accurate imposing VAT in trade among EU member states. The auditing operation was managed by Mr. Josef Pohl, Member of the SAO.
The audited period covered activities done from 1.5.2004 to 30.6.2005 as well as previous or following periods in certain cases of relevant connections. The audited bodies were the Ministry of Finance (MF) and twelve selected financial offices.
Results of the auditing operation show that the Czech tax administration was prepared for changes caused by involving the Czech republic in the European internal market. Notwithstanding shortcomings and problems occurred in both areas – the VAT administration and the using of information gained from the EU.
The audit also pointed out difficulties arising from national differences between accounting records of delivery and acquisition among the EU member states.
Some financial offices failed to use a possibility to require information from the other EU member states despite doubts on the acquisition value of the goods declared in VAT returns.
Data exchange helped to reveal several entities involved into the carousel or fictitious trade, which was carried out for illegal profit from the exorbitant VAT allowances.
The knowledge gained during the audit showed that the VIES provides to the tax administrators information which is necessary for the control of accurate VAT imposing on trade transactions within the EU. However, the tax administration authorities should pay increased attention particularly to consistent reviewing of differences between data declared by the VAT payers and data from the VIES.