Czech VAT Gap Progress

The article aims to estimate the VAT Gap amount development from 2010 to 2016 in the Czech Republic. The methodology of the VAT Gap identification was based on the indirect top-down method for each year of the reporting period, using the authors’ calculation of the weighted average VAT rate in the Czech Republic. The results of the years under review show a VAT gap of more than CZK 100,000 million per year. The breakdown of the VAT Gap into individual parts shows that it is mainly due to the intentional misrepresentation of data by business entities. The VAT Gap associated with this factor ranged from CZK 40,004 to CZK 52,765 million in the monitored years. Only 3.53%–7.03% of the VAT Gap of unlawful tax evasion is subject to prosecution for the tax evasion offense.