Czech company tax among the most complicated in Europe, claims survey

Photo: Tomáš Adamec / Czech Radio

The Czech Republic’s system of company tax is one of the most complicated in the EU, claims a study made in collaboration by the consultancy BDO and two German universities. The Czech Republic ranked fourth from bottom among EU states and its tax system was considered below average in the world-wide ranking.

Photo: Tomáš Adamec / Czech Radio
To compare international levels of tax complexity, data from 1,000 respondents was collected and analysed in a joint research project of the LMU Munich and the University of Paderborn.

The result is a world map ranking countries by the complexity of their tax codes and frameworks. Out of the 100 countries which were analysed the Czech Republic ranked 85th overall and has a particularly bad record within the EU.

Not only is its tax complexity ranked fourth from bottom, but the country’s formal process of how a tax proposal becomes law was ranked the lowest out of all EU states.

Questioned by the Czech News Agency, Zdeněk Vojtěch from the press office of the Ministry of Finance said that the methodology of the study was unknown to him, but that judging from the countries that ranked top, it was more focused on preferential tax regimes rather than those marked out by robust and high quality systems.

It should be noted that traditional tax havens such as Jersey and Mauritius performed the best in the survey, with Estonia ranked as best in the EU.

The survey was focused on rating tax code complexity and tax framework complexity. These were divided into 20 sub-categories including tax incentives, audits and guidance. It was focused on rules for multi-national corporations and participants in the survey included companies such as Deloitte, PWC or Ernst and Young.

Mr. Vojtěch also said that during the last few years, the Czech Republic has been gradually lowering the complexity of tax administration. According to the Czech News Agency he said that a World Bank study shows the average time period for a businessman to work out his tax has been cut from 236 hours in 2016 to 230 hours in 2017.

However, the same World Bank statistic describing the time period for preparing and paying taxes has consistently been hovering around the 230 hour mark since 2012, when the last major decrease took place.

Mr. Vojtěch went on to tell the Czech News Agency that the Finance Ministry’s priority for the coming years is lowering the administration connected with tax payments as well as the tax burden itself.

Dana Trezziová, who is a partner at BDO, the international network of tax consulting firms that worked on the study, told that Czech News Agency that experts also ranked the Czech Republic poorly when it comes to investment incentives. Indeed, the country ranks 97th out of 100 in this category according to the index.

More than 40 percent of respondents said that tax complexity had gotten significantly worse in the past 5 years. However, only 14 percent of them said that the complexity of tax systems has a negative impact on multinational corporations.