Acta Oeconomica Pragensia 2015, 23(6):47-61 | DOI: 10.18267/j.aop.491

Reverse Charge and the Cash Flow of the Public Budgets in the Czech Republic

Růžena Kohoutková, Hana Zídková
Ernst & Young (email: ruzena.kohoutkova@cz.ey.com); Vysoká škola ekonomická v Praze, Fakulta financí a účetnictví (email: hana.zidkova@vse.cz).

Reverse charge is currently used as a measure against VAT carousel fraud. Its extension to all goods and services is discussed among the tax policy makers at the national and EU level. Opponents of general reverse-charge argue that this method of VAT collection would completely change the nature of the VAT system. One of the practical drawbacks of reverse charge is the negative impact on the cash flow of the public budgets. This article quantifies the average monthly financing available to the State thanks to delayed repayments of input tax to VAT payers under the normal VAT system. This amount equals to almost 53 billion CZK and represents the negative impact of the general reverse charge on the cash flow of the public budgets. A change in the deadline for remitting VAT or introducing VAT advances to be paid prior to the final tax payment would reduce the negative influence on public finances.

Keywords: Reverse charge mechanism, VAT system, VAT evasion, cash flow impact
JEL classification: H21, H26, H69

Published: October 1, 2015  Show citation

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Kohoutková, R., & Zídková, H. (2015). Reverse Charge and the Cash Flow of the Public Budgets in the Czech Republic. Acta Oeconomica Pragensia, 23(6), 47-61. doi: 10.18267/j.aop.491
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