System of Instruments to Combat VAT Frauds in the Czech Republic

Abstract

Value added tax is one of the largest sources of public revenue in the Czech Republic and, at the same time, one of the most vulnerable taxes to fraud. The very rules that make VAT a neutral tax on final consumption, namely the right to deduct input tax, the exemption of cross-border supplies with the right to deduct, and the allocation of taxation to the place of consumption, are the same rules that allow tax to go undeclared or unpaid at one point in a supply chain while a deduction or refund is claimed at another. The most serious manifestation of this vulnerability is missing-trader and carousel fraud. This monograph approaches the Czech system of instruments against VAT fraud not as a disparate catalogue of individual measures, but as a functionally coherent whole. It classifies the instruments dispersed across the VAT Act, the Tax Procedure Code, anti-money-laundering law and criminal law according to their primary function: preventive, detection, restorative or retributive. In doing so, it shows which instrument answers which question, where their effects overlap, and why none of them can operate effectively in isolation. Starting with the mechanism of VAT itself, proceeding through the definition and typology of VAT fraud, and concluding with a detailed analysis of individual instruments, from reverse charge and control reports to denial of claims, securing of the tax and criminal liability, the book offers a systematic account intended for tax advisers, attorneys, tax-administration officials, academics and students of law.