Finance Ministry proposes levelling high tax on illegally acquired property

The Czech Finance Ministry is working on a draft law which would give the tax authorities more powers in investigating the source of undeclared property exceeding 10 million crowns. If the owner is unable to prove the origin of the assets, the authorities could levy a high tax on them. The proposal, which is part of a coalition agreement signed by the three ruling parties, has raised protests from the opposition.

Photo: Khalil Baalbaki

The proposed draft legislation, details of which were unveiled last week, is still in the making, but the general idea has strong backing from all three ruling parties who hold a majority both in the lower and upper chamber. Together with the newly established tax-evasion police squad Cobra, the proposed bill aims to crack down on illegally acquired undeclared assets. According to the proposal the tax authorities would analyze the value of private property in relation to declared income and tax returns and in cases where they suspect malpractice they would have the right to ask owner to document the origin of the property. Inability to do so in property exceeding 10 million crowns could be penalized by a fine ranging from 20 to 100 percent of the value of the undeclared assets.

The proposal has evoked an outcry from the right-wing opposition parties who argue that it is unacceptable to approach rich people on the assumption that they are potential thieves. TOP 09 deputy chair Miroslav Kalousek argues that it should be up to the state to uncover tax evasion not up to individuals to have to prove that they acquired their property legally. Going down the opposite road would mean the end of democracy, Kalousek told the media. The Civic Democratic Party is also up in arms about the proposal saying that the idea that the state would be able to pry in people’s personal affairs at random is totally unacceptable and an insult to the vast majority of wealthy people who have acquired their property through honest hard work.

Finance Minister Andrej Babiš has moved to quell public concern, stressing that the measure is not directed against honest, law-abiding citizens. It should merely give the tax authorities, who are fairly powerless at present, the right to ask certain questions regarding the source of property when there is a stark difference between the property and declared income of a given individual – and by stark difference we mean a difference of 10 million crowns or over that which the owner is unable to explain, the finance minister said. He moreover pointed out that similar legislation is in force in Denmark, Germany, Hungary or Spain. The draft law is to be debated by the coalition parties this week and may still undergo changes before being tabled in the lower house. The ruling coalition hopes to see it come into effect as of January 2016.