Wednesday, November 23, 2016

Minister proposes an EET exemption for e-shops now

Timing, wording, volatility are testimonies of the staggering incompetence

Today, eight days before the start of the online monitoring of all cash payments on the Czech territory by the ministry of finance (initially in the restaurant+hotel industry), the so-called EET, the main mastermind of the campaign, finance minister and billionaire Andrej Babiš, decided that the critics who said that EET would be particularly insane for e-shops were right, after all. He will propose "his" ingenious improvement of EET to the government – an exemption for e-shops. At least that's what he told a server named

While the simple slogan defining EET is that it wants to online supervise all cash payments (officially to fight tax evasion but no intelligent person takes this justification seriously), for certain reasons, the plan has always been to monitor all payments except for regular bank transfers. That meant that all payments by credit/debit cards, PayPal etc. had to be supplemented with extra software that "reports" all these payments to the finance ministry in real time, receives two codes for the transaction, and demands that the consumer is given a receipt with these (very long) codes (FIK, BKP) calculated by the servers of the finance ministry.

Numerous experts from the Czech e-shop community have pointed out that the rules were such that it wasn't physically possible to obey all of them by almost any e-shop in the real world – largely due to some unavoidable delays etc. Others didn't go so far but they have pointed out the devastating effect on the most modern technologies underlying the Internet-based economy. For example, some global payment systems don't really allow you to insert an extra reporting procedure to the payment process and they could be rendered illegal in Czechia. Just because our current finance minister is an obsessed communist secret police's snitch, we could just isolate ourselves from the progress of the economy on the Internet in a similar way as North Korea.

Given Babiš's being the de facto prime minister, it's likely that his fellow ministers will embrace "his" ingenious idea to exempt the e-shops from EET. It's good news because a sector of the economy that could be really hurt by the utterly stupid idea of EET shall be saved. (Uber and Airbnb should be exempted as well.) It's bad news because such an exemption will increase the inequality of the entrepreneurs and small businesses in front of the law.

The fact that the ministry and the government haven't been able to figure out that they don't really have a clue what it would do with e-shops – and they had to change this rule dramatically 8 (or fewer) days before the whole campaign is scheduled to start – is quite a testimony to the incompetence of the present Czech government.

In the interview, Babiš said that the payments on the Internet are "too complex" which is why he is proposing the exemption.
I am considering an amendment that would remove e-shops from EET. They have about 18 different types of payments, there are payment gateways there. I want to discuss it with the coalition partners and we will propose to exempt e-shops from EET.
The language was improved to mask that Babiš is an inarticulate bumpkin. At any rate, you may see a typical example what a de facto communist government looks like, how it thinks, and how it affects the economy. They invent some ideologically driven insanity. Obviously, they have no idea what it would do to thousands of special businesses and their consumers in the real world – that directly or indirectly affect the whole economy – because they spend their lives in some communist managerial offices detached from the reality (or the beaches at the French Riviera, in Babiš's case).

So some news about these problems get to the "leaders" (thankfully, the Internet makes it faster than it used to be decades ago) and after some angry denial of the problems, they must agree that there's a real problem with their ideologically driven "improvement" of the society. But what I want to emphasize is how incredibly incompatible a communist government is with the very notion of technological progress. Babiš says that "there are 18 types of payments". This is very funny. Try to count how many types of payments there are on the Internet. Ask your best e-payment experts to answer this question – or at least tell you what they think about the question.

This homework exercise obviously doesn't have any canonical answer. It depends what you count and how. (The number 18 could have very well resulted from an Internet search that has led to this random page. The list is clearly unusable in Czechia because some services are de facto absent here while some Czech competitors of PayPal and others exist.) Some methods are almost the same and you may count them as two methods or one. A subset of the methods may be numerous – but they may be used so infrequently that someone doesn't count them. And some methods are completely experimental and may become very important in the future but they are not important now. The number 18 is clearly just an arbitrarily invented, nonsensical bureaucratic "factoid" without any real beef. Babiš has heard the number somewhere – probably because he asked the very stupid question about the number to someone who knows something about e-shops and this someone had to offer an answer – and he thinks that he looks smarter when he mentions this number even though the effect is exactly the opposite. He only unmasks how clueless he is. Unfortunately, only in the eyes of the people who aren't clueless themselves.

Even if there existed an algorithm to count the number of payment methods on the Internet and even if you got 18, the number 18 obviously won't be true in one year or two. Babiš is a typical communist cadre politician who hasn't done anything else than trading šit (sadly, this is literally true) in his whole professional career. So it's understandable that he isn't an expert when it comes to payment methods on the Internet. His knowledge is composed of childishly superficial factoids such as "there are 18 payment methods on the Internet". Nevertheless, this Bolshevik apparatchik has accumulated a sufficient power to harass basically everyone in industries that he has no clue about – and be sure that it's not just e-shops that he has no clue about. (Last month, Babiš "discovered" the Bitcoin for the first time, too.) He has no idea about anything except for methods to trade šit, mainly with the Arabs, and ways to donate doughnuts to his future voters.

It is not hard to understand the unbelievable stagnation in the communist countries, e.g. in Czechoslovakia between 1968 and 1989. Everything was based on rules such as "there are 18 payment methods". The system didn't know how to update those things safely yet meaningfully so old technologies and old working habits had to be preserved almost everywhere. This may be good enough for Babiš's business – trading of the šit hasn't been evolving so dramatically – but it's a catastrophe for everyone else.

Babiš is a natural catastrophe for our nation and the million(s) of Czech citizens who support this catastrophe represent a national tragedy.

Update Wednesday evening: Babiš has indeed proposed the exemption to the coalition partners. Social democratic prime minister, a very boring emotion-free man, exploded like the Little Boy. The very statement that "Sobotka got angry" was interpreted as a possible beginning of a science-fiction novel by some pundits. He agreed with the justification but couldn't believe that Babiš and thousands of his subordinates haven't been able to figure out that there existed e-shops for 3 years when EET was being discussed. Sobotka expressed worries whether EET could work at all. He ended a very tense meeting prematurely.

Meanwhile, Babiš invented another exemption – for small entrepreneuers with income up to $10,000. Those should negotiate a tax by a lump sum with the IRS and avoid EET. Politicians from all other parties unsurprisingly talk about chaos.

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