Tool for Detection of Value Added Tax Evasion on Fuel Market

The paper focuses on the problem of tax evasion on value added tax on fuel in the Czech Republic. The authors search for a simple, administratively undemanding instrument for reduction of tax evasion which does not distort the fuel market. General methods of tax evasion suppression are not in this specific area effective and applicable. We therefore provide a tool to identify risky selling prices of fuel using usual price of fuel at a specific time period. To determine the usual price it is essential to quantify all its components, which may be problematic especially in the case of margin and transportation cost. Despite its limitations, usual price is both theoretically convenient and empirically applicable instrument for detection of risky selling prices from the perspective of tax evasion. At the moment, when the tax burden of fuels appears to be collection boundary, it is only possible to increase public revenues through decreasing the propensity to tax evasion, and specifically by enhancing the probability of tax evasion disclosure.