If you heard about seizure orders for the first time in connection with the media storm surrounding recent cases, then this is not because a new repressive instrument has been added to the General Fiscal Code but rather because seizure orders have in recent years come under increased scrutiny – and for good reason: they are powerful enough to cause the complete economic destruction of a business. What is this tool about?
If the tax authorities have justified concern that the payment of certain tax debt will become in the future unenforceable (whereas this debt need not yet be due – indeed, it need not even have been assessed yet!), then the finance administration may decide that "tax security" is required and issued something known as a seizure order. In order to do so, the finance administration must have justified concern, based on the financial circumstances of the given entity and the way in which it operates, that it will eventually not be possible, or only with substantial difficulties, to collect the payment of tax (or a part thereof), whereas it may only consider issuing a seizure order if the given taxpayer acts in a non-standard, risky way, given its line of business. Sadly, the seizure order is very often accompanied by a writ of enforcement: if there is danger in delay with the payment of the seizure order, it becomes enforceable as of the moment of issuance.
The Czech legal system recognized seizure orders as early as back in Act No. 337/1992 Coll., on the administration of taxes and duties. Today, the rules governing this instrument can be found in Sec. 103 of the VAT Act (Act No. 235/2004 Coll.) and in Sec. 167 through Sec. 169 of the General Fiscal Code (Act No. 280/2009 Coll.).
5,000 seizure orders were issued over the course of the past four years, prompting the professional press to speak of a "tax jihad". After all, a seizure order allows the authority to block bank accounts, and confiscate assets for sale in an auction. Of course, targeted companies have the option to appeal such seizure orders before the financial directorate in its capacity as the appellate authority. However, not a single appeal was accommodated in all of 2016.
The seizure order is an exceptionally hard-hitting instrument, issued at the sole discretion of the finance administration, which in the view of the Supreme Administrative Court ought to be subject to strict and effective court oversight. However, at current, any such oversight is limited to reviews after the fact.
Source: Sec. 103 of the VAT Act (Act No. 235/2004 Coll.), Sec. 167 through Sec. 169 of the General Fiscal Code (Act No. 280/2009 Coll.), communiqué by the finance ministry on seizure orders and their use by the Czech finance administration