Taxes and the Czech 2017 Election

Glopolis analysis of how the major Czech political parties reflect on tax agenda and what the election results could mean for EU tax proposals in the Czech Parliament.

“Effective tax collection and the fight against tax evasion was one of the leitmotifs of the outgoing government coalition of ČSSD, ANO and KDU-ČSL. However, discussion on measures aimed against excise tax evasion (e.g. the tax cobra team, VAT control statements or electronic sales records) to a large degree overshadowed the topic of corporate tax evasion, which has plagued and continues to plague a large part of the European Union and the global political scene.

Nonetheless, the potential of better corporate tax collection is similar to more effective collection of sales tax through EET (electronic sales records): according to conservative estimates, better auditing of large multinational companies could generate 15 billion crowns annually for the state treasury (the Ministry of Finance believes EET will result in an additional 18 billion crowns).

Not just about money. Tax havens contribute to an increase in inequality, not just between rich and poor countries but among their citizens as well. Czechs perceive income tax evasion to be an example of a double standard, where regular people are hit the hardest.

The 283 subjects connected to the Czech Republic in the Panama Papers affair and the 38 million dollars that passed through Czech financial institutions as part of a global money laundering scandal clearly show that the Czech Republic also has its share of people and companies using the anonymity of tax havens to hide income from corruption or from organized crime, or to potentially even finance various organizations. There is more than ample reason for Czech political parties to take an interest in tax havens. So what do they offer in this regard?

Changing the domestic tax system is a priority among the ten political parties that have a chance to gain seats in the Chamber of Deputies in the fall of 2017. Even if most parties emphasize that the system must above all remain stable, if they are to achieve at least some of their promises, then stability of the tax system is the last thing that one might expect after the elections.

Only three parties do not mention the problem of shifting profits to tax havens in their platform. Even if representatives of political parties admit that international cooperation is necessary in this area, only four parties clearly state what measures they intend to pursue on the international level. And this information can be found directly in the platform of only two parties.

Although political parties mention international tax evasion in their platforms, the overwhelming majority address the problem purely from a Czech perspective. That is, only in terms of the impact it has on the Czech Republic, or what benefits might be gained from regulating it. Even if one might expect certain parties to look beyond Czech borders to address this problem, the overwhelming majority do not consider it necessary to consider the impact of Czech or European rules outside the country or the continent.

We understand that Czech elections are primarily concerned with “Czech taxes”. However, it would be nice to see a greater number of political parties realize that “Czech taxes” are increasingly intertwined with the international environment and international rules.

Chapter 1 was written before the elections and show how the major political parties reflect on tax agenda. Chapters 2 and 3 are based on actual election results and offer a quick analysis what this could mean for EU tax agenda.”

You can download the briefing paper here:

Taxes and the CZ 2017 Election