Government approves draft bill which would level high tax on illegally acquired property

The coalition government has approved a draft bill that is to serve as a crucial instrument in curbing tax evasion. The bill should give tax administrators the right to inquire about the origin of property in connection with tax returns and level a high tax on illegally acquired assets.

Photo: Khalil Baalbaki

After a year and a half of deliberations the three parties of the ruling coalition (the Social Democrats, ANO and the Christian Democrats) have reached consensus on a bill which would give the tax man the right to analyze assets in connection with tax returns and enquire about the source of property in the event of suspected malpractice. Under the proposal the tax office would be entitled to inquire about the origin of unregistered property exceeding 7 million crowns – and, if not satisfied with the explanation given, to impose a heavy tax on it –ranging from 15 to 40 percent of its value for individuals and corporations respectively. The proposed draft legislation would also instigate an amendment to the criminal code under which giving false evidence to the tax office regarding the source of unregistered property could be punishable by up to three years in prison and a hefty fine.

The proposed legal change was part of the government’s coalition agreement and the main reason for the delay in presenting the draft bill to the lower house was a protracted debate on the ceiling of unregistered property which would allow the taxman to “pry” into people’s finances. The original proposal floated in 2014 was 20 million crowns, in proposing the draft bill the finance ministry suggested 10 million and the cabinet finally settled on 7 million crowns in “unaccounted for” 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. However, opinion polls suggest that the public is strongly in favour of such a measure. According to the results of a poll conducted by TNS Aisa four-fifths of Czechs would welcome the bill’s approval.

If approved, the law would go into effect as of January 2016, and would be retro-active for a three year period. Similar legislation is in place in Denmark, Germany, Hungary and Spain.