Prague – The EU’s 2021 system for managing value-added tax (VAT) on cross-border trade has revealed deficiencies and inaccurate data, enabling tax evasion. According to the Supreme Audit Office, data from the Czech Republic gathered through EU tools aimed at combating tax evasion was found to be incomplete and unreliable, leading to non-payment or underpayment of VAT. The Ministry of Finance noted that the European Court of Auditors had also highlighted these shortcomings, emphasizing that this issue affects all member states, and thus a systemic solution is required at the EU level.
The audit revealed that some traders were exploiting the import regime to evade VAT or underreporting the tax by undervaluing shipments. This regime is applicable to suppliers, particularly e-shops from non-EU countries, selling goods to EU consumers. “In this import regime, the supplier pays VAT instead of the end consumer, who would otherwise be liable to pay the tax to customs upon importation,” stated the financial administration. Customs officials reported that they could not verify the legitimacy of this regime usage, finding an error in the declaration in roughly one out of every three shipments from 3,312 checked.
Additionally, traders were found to be underreporting VAT through undervaluation of shipments. Customs officers discovered that in 61 percent of the 861 shipments reviewed, the transport documents listed a lower price than what the end recipient paid. For instance, one declarant reported a customs declaration for goods valued at 100 USD, but a physical inspection revealed the shipment contained gold nuggets, with a total determined value exceeding 2,500 USD.
The Supreme Audit Office also noted an interesting observation regarding how quickly suppliers respond to even minor increases in customs checks. It highlighted Mošnov airport, where nearly 17 million of the 22.5 million items shipped to the Czech Republic last year originated from China. Customs officials inspected 23,243 items there, constituting just 0.14 percent of the total. The Supreme Audit Office added that this scrutiny was sufficient to significantly reduce the volume of shipments delivered to Mošnov airport by the end of 2024. (December 1)
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