December 1, 2016 / 2:26 PM / in a year

Czech pubs at crossroads as government launches sales-reporting system

PRAGUE, Dec 1 (Reuters) - The Czech government launched an online sales-reporting system on Thursday for around 40,000 bars, restaurants and hotels in a bid to cut tax avoidance, but raising concern that prices will jump and many pubs at the centre of village life around the country will close.

The “EET” system requires outlets to report every transaction online and print out a receipt that can be matched against its transaction database.

The Finance Ministry is hoping to bring in up to 660 million euros in extra tax revenue a year once the system is extended to all retail outlets over the next two years. The value-added tax on meals has been cut to 15 percent from 21 percent to help pubs bear the cost.

The chamber of commerce has been supportive of the law as it will help honest businesses. But small-business representatives say the costs of getting cash registers, Internet connections and running the system will be too high in an already stretched sector.

Plzensky Prazdroj, the largest brewery group and maker of Pilsner Urqell, said hundreds of pub customers have stopped ordering kegs, indicating that at least some were closing.

“It has been mostly smaller and countryside pubs, which do not serve hot meals,” said Tomas Mraz, head of restaurant sales at the brewery. “We expect the main impact from EET will come at year-end.”

The Czech Republic, home to the original pilsner lager, has the highest beer consumption per capita in the world at around 140 litres annually. A world-topping 40 percent of that is draught beer in pubs, which are often the centre of social life.

Supporters of the system say that those closing down probably include many that failed to declare income for value-added tax and used unreported revenue to pay staff under the table, avoiding payroll taxes.

“The project is a success if only because it levels the business environment,” Babis told Lidove Noviny newspaper on Thursday. “EET will instantly straighten wages in the restaurant business.”

Pubs, which often supplement their income with slot machines, have already been under pressure from tougher gambling regulations, and some fear a planned smoking ban would be another blow.

“(EET) is just another hit. Nobody in the business, perhaps apart from large hotels, has been declaring full revenue,” one restaurant owner from the east of the country told Reuters on condition of anonymity. He is closing his business.

An owner of several mid-range Prague restaurants said prices were going up to make up for the extra costs. “People I know are raising prices by about 10 percent,” he said. (Reporting by Jan Lopatka; Editing by Hugh Lawson)

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