Prepare for the “tax cobra” in good time, our litigation team advises

The emerging government coalition has published a draft programme declaration. A significant part of the document focuses on taxation, in particular on strengthening fair tax collection and combating tax evasion.

In the context of the entire strategy, the declared intention to introduce the Digital Tax Cobra, which is to use advanced analytical tools and artificial intelligence to detect fictitious transactions and illegal tax optimisation, is in fact inevitable.

If the state budget is burdened by the announced policy of tax cuts for companies, tradesmen or, for example, cheaper energy, it will logically have to find the means to implement it. Apparently, representatives of the future government see one source of such funds in improved tax collection. With this in mind, it is clear that in the coming years we will see increased activity in the area of tax audits by the tax administration.

At Grant Thornton Czech Republic, we regard tax audits as a fully legitimate instrument for ensuring proper tax administration.
Within tax proceedings, both the taxpayer and the tax authority have their respective roles, obligations, and rights. Navigating these effectively is far from simple, and doing so in a way that safeguards the taxpayer’s legitimate interests throughout the process requires careful attention. Every detail can matter, and our practical experience shows a significant difference between engaging a professional advisor at the very outset of a tax audit (typically, the Tax Office contacts the taxpayer to announce its intention to conduct an audit) versus involving one later in the process — or even only when a specific issue arises and needs to be resolved.

What do the numbers say?

The “Tax Cobra” project is not new in the Czech Republic. It was introduced in April 2014. It can generally be described as a method of work and procedural practices involving the customs administration, the tax administration and the police. The primary objective is to ensure proper tax collection or the return of illegally obtained funds to the state budget. According to the customs administration, a total of CZK 16 billion has been saved in the ten years of existence of the project.

Breaking the number down into individual taxes, Jiří Žežulka, director of the Control and Risk Section of the Financial Administration, warned in a statement to Seznam Zprávy that perpetrators of tax crimes are moving away from VAT to other taxes. While CZK 878 million was secured in VAT leakages in 2024, by the end of this July it was only CZK 242 million. That is why the focus of the VAT Tax Cobra is to shift and focus more on illegal employment.

We have a specialized litigation team that will guide you through all the pitfalls of tax proceedings and, if necessary, represent you in disputes or court proceedings. We complement our experienced litigation team with specialists in various areas of tax law (from income tax to VAT to transfer pricing). Due to the combination of these areas of expertise, we guarantee the application of the right solution for your specific case.