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Untaxed one-crown bonds are legal, no check planned, FinMin says

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Prague, Feb 21 (CTK) – The Czech Financial Authority will not launch across-the-board checks focusing on untaxed yields from one-crown bonds, Finance Minister Andrej Babis has written in reaction to the request Prime Minister Bohuslav Sobotka addressed to him last week, daily Denik writes yesterday.
On February 15, Sobotka (Social Democrats, CSSD) asked Babis (ANO) to say whether the Financial Authority had checked the bonds in question.
In his answer, cited by Denik, Babis wrote that the Financial Authority does not find the practice of untaxed yields unlawful.
Later yesterday, Sobotka said on that he considers Babis’s answer too vague.
Babis himself bought ten-year one-crown bonds of Agrofert, a giant chemical and food holding he owned until earlier this month, for 1.482 billion crowns in December 2012.
The system of untaxed one-crown bonds was outlawed as of 2013.
Sobotka asked Babis whether the Financial Authority dealt with the cases of issuing and purchasing one-crown bonds.
“Has a tax been additionally imposed in some of these cases, or when will this happen?” Sobotka asked.
According to Denik, Babis responded that the Financial Authority previously concluded that the issuing of one-crown bonds was never banned by any legal directive, which is why the practice of untaxed interest yields cannot be assessed as unlawful without any other related aspects.
Babis wrote he does not find it necessary to launch across-the-board tax checks of one-crown bonds.
Sobotka also asked Babis to assess the situation where a company issues one-crown bonds, which are subsequently purchased by the company’s owner as the only buyer.
“Is this not a suspicious behaviour with the aim to avoid tax payment? Is this not a situation that the Financial Authority should check in the interest of the state budget and citizens of the Czech Republic?” Sobotka asked.
Babis again reacted saying such procedure is not unlawful.
“No legal directives define who can buy bonds, nor do they ban company owners from buying bonds from their own company,” Babis wrote.
“A bond behaves like a loan. It is no rarity if an owner extends a loan to his company from his own sources,” Babis added.
In an interview with, Sobotka admitted that he obtained Babis’s answer promptly, but said “it is too vague, unfortunately.”
He said Babis’s answer does not make him sure that the Financial Authority analysed similar cases and assessed their possible unlawful character.
That is why Sobotka is still waiting whether the Financial Authority will comment on the affair, he said.
Babis, in his letter, asked Sobotka to check the counter-intelligence service (BIS) for suspected corruption in connection with the method of calculation of the health and social insurance fees paid by self-employed people.
He also asked Sobotka to explain the circumstances of the privatisation of the OKD coal mining company in 2004. At the time, Sobotka was finance minister in the CSSD-led cabinet that approved the sale of the state’s minority stake in OKD.
($1=25.449 crowns)

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