Latvia: new offensive against shadow economy

One in five Latvians receive their salary in an envelope. A new regulation came into effect at the start of September under which the employees of employers who do not pay contributions pay a "voluntary tax" and in exchange receive free health insurance. Moreover the tax authorities plan to write to around 400,000 people and encourage them to pay social insurance contributions. Latvia's press isn't all too convinced by the plans.

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Diena (LV) /

Fighting against windmills

Latvia won't be able to solve the problem of the shadow economy on its own, Diena fears:

“The transition to cashless payments would of course reduced the number of salaries paid in cash in envelopes. But the shadow economy consists of more than coins and bank notes moving from hand to hand. We shouldn't forget the international money laundering scandals that have ruined the reputations of banks in various countries. Or the cryptocurrencies that are used for unofficial transactions. ... Economic experts stress moreover that the mechanisms of the shadow economy don't just exist in one country but in several. So only through joint efforts will we be able to destroy the shadow economy.”

Dienas Bizness (LV) /

No one can collect the 663 million euros

Dienas bizness doubts the tax authorities' plans will pay off:

“It's clear that repressive methods only work to a certain extent and that you can't station a policeman next to every taxpayer. ... One real problem is that we're forever discussing our problems at the top of our lungs. It's no wonder that in the run-up to the elections the candidates are promising to much acclaim that they'll solve the problem although they don't have a simple solution. If we take the figure of 663 million euros [in annual unpaid taxes], it's not hard to imagine what we could invest all that money in: healthcare, roads, infrastructure. But even the most diligent taxman won't be able to collect such sums.”