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The Act of the Year for Czech Entrepreneurs is the European Directive Supporting the Interconnection of Commercial Registers

"Entrepreneurs appreciated most the legislative act that gives them hope that one of the largest problems of cross-border business activities within the EU – the availability of true and updated information on business partners – will be resolved."

- Tomáš Babáček,
Attorney at Law, Ambruz & Dark / Deloitte Legal

In Prague on 16 May 2013 – After a year, Czech firms once again selected the best and the worst legislative acts of the year. In the prestigious ACT OF THE YEAR 2012 survey, in which more than 400 major Czech businesses voted, the best rating was assigned to Directive 2012/17/EU of the European Council, aimed at interconnecting national commercial registers of individual EU Member States. Contrarily, the worst legislative act of the year selected by entrepreneurs was the amendment to the Value Added Tax Act introducing the "institute of an unreliable VAT payer". The fourth year of the survey was organised by the cooperating legal offices Ambruz & Dark/Deloitte Legal together with their partners.

The addressed entrepreneurs decided on the results in the Act of the Year and the Pasquil of the Year categories in the voting held from 18 March to 10 May on the website www.zakonroku.cz based on the nominations of the Nomination Committee consisting of renowned lawyers across legal sectors and other experts. The purpose of the survey was to contribute to the discussion among Czech businessman, politicians and the public on the quality of legal regulations adopted last year and their impact on the Czech business environment and on the quality of the legal environment in the Czech Republic in general.

"Entrepreneurs appreciated most the legislative act that gives them hope that one of the largest problems of cross-border business activities within the EU – the availability of true and updated information on business partners – will be resolved. The Directive undertakes the EU and its Member States to adopt related legislation to ensure direct communication between commercial registers and reduces administrative and financial burdens for entrepreneurs and third parties," said Tomáš Babáček, Chairman of the Nomination Committee of the survey and lawyer of Ambruz & Dark/Deloitte Legal.

"In a period in which a number of EU Member States face economic recession, the Directive on the interconnection of commercial registers may make it easier for many companies to expand their business activities to other Member States at a reasonable cost. This may be crucial for their survival and maintaining the employment rate," added Luděk Niedermayer, member of the Nomination Committee and Director of Deloitte Advisory.

For firms, the worst legislative act and the winner of the Pasquil of the Year category is the amendment to the VAT Act, which introduces the institute of an unreliable VAT payer. Pursuant to Act No. 502/2012 Coll. prepared by the Ministry of Finance of the Czech Republic, now the recipient of a taxable supply guarantees the VAT payment if the provider of the taxable supply is considered an unreliable payer or if the recipient sends the payment to a provider's account other than that registered with the tax authority. As such, the institute of unreliable payer does not only relate to entrepreneurs who will be included in the black list of the tax authority but also to firms that will decide to carry out business with unreliable payers.

"It is no surprise that this Act annoys entrepreneurs and that they consider it a serious complication in their business. By this Act, the state transfers a part of its own responsibility for tax collection to recipients of taxable supplies, including the related costs. No wonder entrepreneurs express resentment towards the Act," added Tomáš Babáček.

"It was revealed that entrepreneurs were predominantly worried about tax changes last year with the unreliable payer not being the only thing that troubled them. The December tax package relating to changes in tax rates effective from the beginning of this year was also a test of patience. The technical amendment, the approval of which was still uncertain three days before its effective date, is connected with a substantial increase in administration, which costs time and money that may invested much more effectively. In addition, this amendment is connected with abnormal creativity for traders without the Internet and on-line banking," commented Eva Svobodová, CEO of the Association of Small and Medium-sized Enterprises and Crafts of the Czech Republic.

"While the state should better consider the transferring of some of its competencies to the more-effective private sector, by this act it transfers responsibility to the private sector without giving it any competence. The collection of taxes is one of the key tasks of the state, not entrepreneurs," says Richard Baček, member of the Nomination Committee and General Counsel of Siemens CR.

"The message from Czech businesses for local lawmakers in this survey is clear: 'If you need to increase taxes, listen to the opinions of the industry and leaders (drivers) of the Czech economy, let us know in time and do not burden us with unnecessary administration'," said Monika Zahálková, Managing Director of the Czech Institute of Directors.

"The results show that Czech firms suffer most from the lack of any concept in certain changes made by the state, which significantly impact their business activities. Let us hope that the entrepreneurs' voice expressed through this survey will contribute to the improvement of the legislative process in the Czech Republic and make lawmakers consider the problems in the business sector more thoroughly," said Marie Brejchová, President of the Association of In-House Lawyers (UPP ČR) and the Head of the Legal Department of Pražská energetika, and continued: "Of course, we as corporate lawyers and legal advisors of our employers would also like to contribute to the overall improvement. For the future, we should think of laws that may still be missing. For example, we impatiently wait for the Act on State Service to be amended consistently."

In the previous year of the survey for the best (and worst) legislative act for the business environment in the Czech Republic, the European Directive significantly limiting delayed payments of invoices in business relations became the Act of the Year 2011, while the unsystematic penalties for the Schwarz system were assessed as the Pasquil of the Year.

Summary of the results of the ACT OF THE YEAR 2012:

  Act of the Year 2012 – The best legislative act for the business environment %

1.

INTRUMENTS TO IMPROVE THE FUNCTIONING OF THE EU INTERNAL MARKET (INTERCONNECTION OF COMMERCIAL REGISTERS)

25,3

2.

SUPPORT FOR THE OUT-OF-COURT RESOLUTION OF DISPUTES (THE MEDIATION ACT)

24,4

3.

CONCEPTUAL STRENGTHENING OF CONTRACTUAL FREEDOM AND UNDERSTANDABILITY OF REGULATIONS (PRIVATE LAW RECODIFICATION)

19,7

4.

INCREASE IN TRANSPARENCY IN GRANTING PUBLIC CONTRACTS

16,5

5.

UNBLOCKING CHURCH PROPERTY TO ALLOW THE MANAGEMENT THEREOF

14,1

 

 

 

  Pasquil of the Year 2012 – The worst legislative act for the business environment %

1.

TRANSFERRING RESPONSIBILITY FROM THE STATE TO PRIVATE ENTITIES (UNRELIABLE VAT PAYER)

37,4

2.

ADOPTING THE KEY ACTS AT THE ELEVENTH HOUR (THE DECEMBER TAX PACKAGE)

32,4

3.

INCREASING COMPLEXITY INSTEAD OF SUPPORTING THE DUE APPLICATION OF REGULATIONS (AMENDMENT TO THE PUBLIC PROCUREMENT ACT)

11,5

4.

INADEQUATE BUREAUCRATIC PATCH FOR THE FAILURE OF STATE SUPERVISION (COMPULSORY BIRTH CERTIFICATES FOR ALCOHOLIC DRINKS)

10,6

5.

REPEATED DELAY OF THE EFFECTIVE DATES FOR ADOPTED REGULATIONS

8,1

This year, the survey partners included the Association of Small and Medium-sized Enterprises and Crafts of the Czech Republic, the British Chamber of Commerce in the Czech Republic, Business for Society, the Czech Institute of Directors, the Confederation of Employer and Business Associations of the Czech Republic, Pro Bono Alliance and the Association of In-House Lawyers of the Czech Republic (UPP ČR). The media partners included: C.H. Beck and the Beck-online legal information system, CSR fórum, Ekonom, Hospodářské noviny, iHNED.cz, Právní rádce, ProbyznysInfo.cz, PubliCon and Trade News.

 

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© 2013 Deloitte Czech Republic

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Job Title:
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Phone:
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Email
lkropik@deloittece.com

 

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