Every second Czech cheats state on taxes

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Imagine having your car repaired and being offered a 20% discount for not asking for an invoice. Would you be tempted or would you act like a good citizen and reject the offer? Well, in the Czech Republic many fail to resist temptation. Thursday's issue of the daily Mlada Fronta Dnes gave out a warning signal when it disclosed the results of a study made for the World Bank according to which every second Czech citizen is guilty of cheating the state on taxes. More from Dita Asiedu:

Currently, a quarter of Czechs admit to earning a living by earning untaxed money on the side. Seven years ago, the number of people working in unofficial jobs was 9% lower than today. A study made for the World Bank by economists Jan Hanousek and Filip Palda warns that the number of citizens failing to pay taxes from their earnings is on the rise. Furthermore, many of these people also receive social or unemployment benefits. In this way, the state suffers twice. Undeclared taxes and the misuse of social benefits are a heavy burden on the state budget. In fact, economists estimate that last year's state budget was cheated of some 138 billion Czech crowns, or close to 4.5 billion U.S. dollars.

The reason why more and more people are succumbing to temptation is quite simple. Although they know that not declaring income is illegal they are also aware that they will almost certainly never be caught. For many, there is no moral guilt either, since the state is perceived by many as taking taxes without giving anything in return. According to economists, countries with high taxes do not necessarily face such problems, provided that their citizens are confident that they are getting the necessary services in return. Since tens of thousands of Czechs make money without declaring taxes, it is also questionable whether the Czech Republic's unemployment rate really is as high as the official 9.1%.

The Labour and Social Affairs Minister, Zdenek Skromach, is convinced that a system similar to that in Great Britain will be the most effective way of combating the problem. He argues that the state can prevent the unemployed from working illegally by making them take part in regular special courses where attendance is compulsory.