The Impact of Tax Audits and Digitalization on the Amount of Tax Arrears: Analysis of Factors Influencing the Efficiency of Tax Collection

Background - Digitalization has become one of the most important trends in modern tax administration and public sector management. Tax authorities increasingly rely on digital technologies to improve administrative efficiency, enhance taxpayer services, and strengthen tax compliance. Despite significant investments in digital tools, the extent to which digitalization contributes to reducing tax arrears remains an open question. Aim - The aim of the article is to analyse the factors influencing the amount of personal income tax arrears in the Czech Republic during the period 2013–2024, with particular emphasis on digitalization and selected tax administration instruments. Methods - The study is based on annual data obtained from the reports of the Czech Financial Administration. The analysis includes indicators related to the number of tax entities, tax audits, electronically filed tax returns, assessed taxes, procedures for clearing doubts, tax arrears and arrears recovered through enforcement actions. Monetary variables were adjusted for inflation using the Consumer Price Index published by the Czech Statistical Office. Pearson correlation analysis and multiple linear regression analysis were employed to examine the relationships among the selected variables. Results - The results revealed a strong positive relationship between the number of tax audits and tax arrears. The regression model explained 95.4% of the variability in tax arrears and identified tax audits as the most significant predictor. The number of tax entities exhibited a statistically significant negative effect on tax arrears, suggesting that a broader taxpayer base may contribute to lower levels of unpaid tax liabilities. Although electronically filed tax returns showed a significant negative correlation with tax arrears, their effect was not statistically significant in the multivariate regression model. This finding suggests that digitalization may influence tax arrears indirectly through broader improvements in tax administration efficiency rather than through a direct effect. Conclusions - The findings indicate that effective tax administration cannot rely solely on digitalization. While digital tools contribute to administrative modernization and may support tax compliance, the reduction of tax arrears appears to depend primarily on effective control mechanisms and the overall functioning of tax administration. The study contributes to the ongoing discussion on the role of digital transformation in tax administration and provides empirical evidence on factors associated with tax arrears in the Czech Republic.