Peter Varga’s observations on the dirty business with VAT tax controls

Peter Varga gave another interview on VAT tax controls. He also added his insights in connection with the case of an entrepreneur whose company entered bankruptcy after a series of 36 tax inspections and he as a natural person entered personal bankruptcy. At a time when we are gradually learning about how the rule of law has disintegrated, there is a great deal of room for these specific addressees to speak out about the failures of the state. From our perspective, in conjunction with the practice of our law firm, these are mainly the addressees of the obsessive VAT tax audits.

Until now, however, we may have thought that in cases of tax audits, it was more a case of the incompetence of the state apparatus to understand the institution of the burden of proof and the impact of the non-recognition of VAT deductions on the operation of a credit-financed goods company. (Peter Varga said more about this topic in his interview for Trend). However, even after these experiences of entrepreneurs, it seems that the problem with VAT tax controls may in some cases be even purposeful. The testimony of some entrepreneurs suggests that the State’s primary objective in the VAT tax controls may not have been its desire to collect taxes fairly, but rather the desire of competitors to reduce the value of the business, for example, prior to a sale or other commercial event.

The problem with VAT tax audits is the fact that if the state bites, you have to employ a full-time person to administer the agenda and you have to pay a lawyer during the tax audits themselves if you want to have a better chance of success in court. And if you don’t have sufficient reserves and the state disallows the VAT deduction or demands VAT on intra-community output (or even both on the same goods) and at the same time your annual margin is less than the value of the “VAT withheld/required VAT”, your business can easily be ruined in this way before you even get before an independent court. And the latter, perhaps also due to the not very practical regulation of the Administrative Procedure Code, does not grant suspensive effect to the decisions of the tax administrator. So it can very easily happen that a tax claim will be enforced even before the legality or illegality of the tax administrator’s procedures and decisions are reviewed by an independent court. That is why, as part of our comprehensive legal, tax and accounting services, we advise our clients on how to structure their business to minimise these risks.

For more on this topic, see this article for Trend: https://www.etrend.sk/trend-archiv/rok-2019/cislo-40/spinavy-biznis-s-vratkami-dph.html