Fiscalization must not be a political issue

At the July session, the Czech Parliament voted to STOP fiscalization (EET-Electronic records of sale) in the Czech Republic from January 2023. From the beginning, this project has been marked by a political struggle with great resistance from the opposition parties, which today form the majority in the parliament.

EET started to apply on 1 December 2016 for restaurants and accommodation facilities.

From 2017, EET was mandatary for the second group of taxpayers (retail).

Fiscalization of the third group was suspended due to minor inconsistency of the fiscal law with some of the basic laws. The harmonization lasted for almost two years and when it was cleared and was finally supposed to start, first the third and then the fourth group, due to Covid, the Government decided to stop the fiscalization process for all 4 groups. This delay was supposed to last until January 1, 2023.

The former minority, and now the majority in the parliament, stopped fiscalization as per their promise made in the election campaign.

The reasons presented on July session are as follows:

The project was very expensive from the beginning. The initial investment cost 15 million EUR and then every year another 12 million EUR.

Is the cost realistic?. It is planned that the project will be done from scratch, which means that a new company has been established with all the necessary investments (infrastructure, equipment, employees, …). Could this have been avoided with better planning?

The basic question related to the price is whether there were corrupt elements in the process of introducing the system and whether the financial plan was appropriate. The prime minister at the time, Andrej Babiš, who was a great supporter of fiscalization, was constantly accused in the press of embezzlement of state funds.

The fiscalization cost to each individual taxpayer is high and many taxpayers closed their businesses due to fiscalization.

The first and second groups of taxpayers consist of taxpayers who already issued invoices and had adequate equipment. Adjusting to fiscalization did not cost them much. Other groups have not even started fiscalization due to inconsistencies in the law and due to Covid. There was not reason for them to close the bussines before the start.

With each new model of fiscalization, the price for taxpayer decreases. It is already an established practice that the government participates in the costs of the individual taxpayer.

Fiscalization did not contribute to the increase in tax collection, it did not prove to be a good tool for the fight against the gray economy.

According to Andrej Babiš, EET brought a total of  1,5 billion EUR to the state, which is why he strongly opposes its cancellation.

Alena Schiller, previous Minister of Finance said. “EET would bring 500 million EUR to the budget every year.

These figures are good considering that first 2 groups generally in the developed world do not participate in gray economy in a large percentage. It is not known whether any serious analysis concerning economic benefits was done. Was it obscured by the negative attitude of the opposition?

Based on the officially published data on the number of recorded fiscal invoices, it can be seen that in the period 2017-2019, number was high and within the limits of the forecast(max. 16 milions per day), and that it decreased in 2020 and 2021( 10 milion per day), when the obligation to issue fiscal invoices was suspended due to Covid. During that period, 70% of taxpayers continued to record fiscal invoices voluntarily. Statistics from March 2022 show that approximately 53,000 entrepreneurs of 201,000 already registered are still voluntarily issuing fiscal invoices even after the knowledge that the obligation will be terminated

Taxpayers are honest and there is no need to be monitored.

Taxpayers always behave in accordance with the law. There are only more or less honest ones, and the law on fiscalization equalizes them.

It is clear that as far as sale fraud is concerned, the 3rd and 4th groups (expected 300,000 taxpayers) are the most risky and that since 2018 in the Czech Republic these groups have been excluded from fiscalization. Reason was as mentioned, inconsistencies of the law, but the main reason was  because they were the loudest groups of voters whom the government fears. This is not the case only in the Czech Republic, but everywhere the government needs to be strong to be able to ignore the protests of dishonest groups. 

At the July session, the former Minister of Economy Havliček said:

“Why is the government canceling EET, which belongs to the 21st century? Why doesn’t rather improve it? Sooner or later, all countries will have electronic records of sale, and many are already gradually introducing it”.  All this confirms the fact that significant projects that should contribute to increasing tax collection must not depend on political conflicts. The Czech Republic is an excellent example of this, especially if we know that there were two previous failed fiscalization attempts in 1997 and 2007 due to same reasons.