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Prague – The new system for managing value-added tax on cross-border trade, introduced by the EU in 2021, has shortcomings and shows erroneous data. This then allows for tax evasion. The data from the Czech Republic obtained from EU tools for combating tax evasion was also incomplete and unreliable, leading to non-payment or underpayment of this tax. This was stated today by the Supreme Audit Office regarding the results of the VAT management audit focusing on cross-border electronic commerce. The Ministry of Finance stated, among other things, that the European Court of Auditors also pointed out the identified shortcomings, as this is a problem that affects all member states. Therefore, according to the Ministry of Finance, a systemic solution must be found at the EU level.
The audit office also found that some traders were abusing the so-called import regime to avoid paying VAT, or that they were underreporting this tax due to undervaluation of shipments. The import regime applies to suppliers and mainly e-shops from non-EU countries that sell their goods to end consumers in the EU. “When using the import regime, the supplier pays VAT instead of the purchaser of the goods (the end consumer), who would otherwise have to pay the tax to the customs office during the customs procedure upon importation of the goods,” the financial administration stated. Customs officers, for example, could not verify whether the trader was using this regime legitimately. An error in the declaration was found on average in every third shipment out of 3,312 checked.
Traders also underreported VAT by undervaluing shipments. Customs officers found that in 61 percent of the 861 shipments checked, the transport documents showed a lower price for the goods than what the end recipient paid. “For example, one declarant submitted a customs declaration for goods worth 100 USD (about 2,100 crowns), i.e., less than 150 euros. However, during a physical inspection, the customs office found that the shipment contained gold nuggets. The total value of the shipment was determined to be more than 2,500 USD, which was the price paid by the end recipient,” stated the Supreme Audit Office.
“The audit by the Supreme Audit Office described another interesting fact, namely how quickly suppliers of goods react even to slightly increased customs controls,” the office noted. It cited the Mošnov airport as an example. Out of a total of 22.5 million items in shipments sent to the Czech Republic last year, nearly 17 million arrived from China specifically at Mošnov airport. Customs officers checked 23,243 items there, or 0.14 percent. “This was enough for the number of delivered shipments to Mošnov airport to significantly decrease by the end of 2024,” added the Supreme Audit Office. (December 1)