Convoluted laws seen as factor in high administrative burden on Czech firms

Business people in the Czech Republic have to deal with acres of red tape and spend far more time processing their tax returns and other paperwork than their peers in some other European states. Frequent legal changes are cited as a major part of the problem.

Photo: Filip Jandourek

According to an OECD study quoted by Czech Radio, Czech entrepreneurs spend on average 405 hours a year doing their taxes and other official paperwork. That works out at almost 17 days. In Denmark the figure is just five days.

Karel Havlíček of the Association of Small and Medium-Sized Enterprises outlines the scale of the bureaucracy facing his organisation’s members.

“One of the biggest problems, which burdens us with a high amount of administration, is the taxation system, which is extremely complicated. We have to spend twice as long doing our taxes as, for instance, in Germany and Slovakia. And if we look at the Benelux countries, it’s up to 10 times as much.”

The country’s Chamber of Commerce wants taxation and other legislation affecting businesses to be changed no more than once a year. The current approach is simply overwhelming, says the association’s Tomáš Sýkora.

“In our view the problem is that there is a constant merry-go-round of new laws and norms. We would like to see a more clearly laid out legal system. Take for instance, the law on VAT or the legislation on health and social insurance – it has been changed 60 or 70 times. Business people can’t keep up with all the new legislation.”

Prime Minister Bohuslav Sobotka told Czech Radio that his government’s championing of online communication with the tax authorities will make life easier for entrepreneurs.

Bohuslav Sobotka, photo: Khalil Baalbaki

“We will look for ways to reduce the cost of administration. We want the filing of returns and payment of taxes – all interaction with the tax authorities – to be 100 percent via the internet. It will be one or two years before the tax administration completes that process.”

Meanwhile the president of the Czech Chamber of Commerce, Vladimír Dlouhý, says he is all for the increased use of the internet as a means to cut red tape – and offers an example.

“Look at the small Baltic States, which 25 or 30 years ago were part of the Soviet Union, which was regarded as backwards in this regard. But the Baltics are today the most progressive when it comes to making their administration electronic and reducing the burden on businesses. So let’s look elsewhere than to the West – and let’s not be afraid to do so.”