“In 2019, the total tax burden should slightly decline in the Czech economy. This has been aided by the re-assignment of selected services and goods from the basic VAT rate to the first or second reduced VAT rates. This, for example, applies to water and sewer rates, catering services, bike repairs or hairdresser’s and barber’s services. A whole series of parameters have also changed in respect to personal income tax. As part of excise taxes, a tax has newly been imposed on heated tobacco products,” says David Marek, Deloitte’s Chief Economist. “In the long term, the level of taxation is on the rise in the Czech Republic and, as the date of its Tax Freedom Day suggests, its total tax burden ranks it among the EU’s upper half.”

Taxes in Practice: Increased Administrative Work, Tighter Audits and Frequent Changes to Legislation

Although the total tax burden is slightly declining, taxpayers and remitters have been experiencing an increase in the number of tax requirements in the long term. Businesses spend a rather lengthy amount of time on tax compliance, which is also for the reason that, in a number of cases, they do not merely explain the misstatements in their reports, but also clarify misstatements made by their business partners.

Previously, tax authorities focused on individual items. Lately, they have been assessing the overall economic and tax situation of the taxpayers/remitters based on a more detailed analysis of the data in tax returns and reports and other information sources. This places greater demands regarding the correct systems setup as well as the skills, knowledge and regular training of taxpayers’ employees.

“For a long time, it has no longer been sufficient to merely correctly maintain accounting records and supporting accounting documents to demonstrate the correctness of the reported tax position. Many cases, taxpayer/remitters are obliged to substantiate their assertions, for which reason they archive large amounts of various documents relating to their activities. Given the complexity and interrelatedness of all systems, each legislative change, albeit seemingly minor, carries a great cost for large companies,” says Radka Mašková, Director at Deloitte’s Tax services.

Tax Freedom Day

Tax Freedom Day is a simple and easily comprehensible demonstration of the tax burden in the economy. The method used for calculating the date of Tax Freedom Day divides the year into two parts, in a ratio corresponding to the proportion of the government sector’s total taxable income to net national income. Calculations for prior years are always updated in reviewing the statistical offices’ data used in the calculation.