Is VAT Administration System Efficient? The Case of the Czech

  • Hana Zídková Prague University of Economics and Business, The Czech Republic
  • Tomáš Vrána Prague University of Economics and Business, The Czech Republic
Keywords: C-Coefficient, definitive VAT system, final consumption, intermediate consumption, reverse charge, VAT efficiency, collection efficiency, Czech Republic

Abstract

This paper is focused on the efficiency of VAT collection under the standard credit invoice method. It discusses several approaches on how to evaluate the efficiency of the VAT system. The authors create their own indi­cator called the C-Coefficient that determines how many times must one unit of currency be checked by the financial authority to collect it into public budgets. The C-Coefficient is calculated from the data on VAT revenues and total VAT paid on all taxable supplies performed in the economy. The concrete results are shown for the Czech Republic for the period 2005 to 2018. The C-Coefficient reaches the values between 7.92 and 11.56, meaning that in the most efficient year (2018) the tax authorities had to inspect each collected CZK more than 7 times, whereas in the least ef­ficient year (2008) they had to audit each collected CZK more than 11 times. Authors also discuss what influences the C-Coefficient. Among impor­tant factors are measures against VAT fraud, especially the specific reverse charge, as well as the number of VAT payers in the pro­duction and distribution chain and the difference between the average VAT rates applicable on final and intermediate consumption.

Published
2020-11-30
How to Cite
Zídková, H., & Vrána, T. (2020). Is VAT Administration System Efficient? The Case of the Czech. Central European Public Administration Review, 18(2), 121-134. https://doi.org/10.17573/cepar.2020.2.06
Section
Articles