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Gov’t successfully tests new electronic sales tax system

Prague Castle. Photo: Bohemist

Ministry of Finance tests 43,000 receipts as December 1 deadline looms.

By BOHEMIST STAFF

PRAGUE –  Czech Finance Minister and billionaire businessman Andrej Babiš yesterday announced that the government has successfully processed 43,000 receipts while testing the new electronic records of sale (EET) system set to come into force on December 1.

Speaking during a press conference, Babiš said that 500 entrepreneurs participated in the pilot program and that the receipts were processed successfully. The controversial EET system will ensure that local bars and restaurants pay the mandatory 21% tax required by law.

Small business owners have complained that enforcing the tax would make them less competitive and in some cases force them to close altogether as customers would be off put by having to pay more.

“Everything is running according to plan. Starting yesterday, a 12 hours a pilot project benefited from nearly 500 entrepreneurs who have so far issued around 43,000 bills,” he said.

“We need entrepreneurs to realize that there are remaining 19 working days until there is a sharp start,” he said, adding that the program would  begin collecting from around 40,000 entrepreneurs.

while the government will be the primary benefactor of the system by garnering greater revenue, experts believe that large companies, such as international restaurants McDonald’s Corp., Denny’s Inc. and Hard Rock Cafe International, Inc., also stand to benefit as consumers scramble to find cheaper eateries.

“The main expectation” is that EET “will straighten out the business environment. Today, those who pay their taxes are doing business next to those who don’t pay their taxes. That’s not equal conditions for everyone,” Alena Schillerova, deputy finance minister for taxation and customs, told Bloomberg BNA in an Oct. 12 interview.

Among those small business most likely to be affected by the new tax system are hotels, guesthouses, restaurants, pubs, canteens, cafeterias, and any business where customers can also buy snacks, like salons and spas.

According to the Czech Finance Ministry, the hospitality sector is currently the fourth largest source of the country’s shadow economy, and VAT collected from bars and restaurants could go up by as much as US$382 million per year — up from just under $66 million.

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