Latvian Revenue Service takes hard line on sectors most exposed to shadow economy

In order to curb the shadow economy and tax evasion, the State Revenue Service in Latvia will continue active control measures at companies in those national economy sectors that are the most exposed to the shadow economy; amendments have been drawn up in cooperation with the Finance Ministry in order to heighten the responsibility of dishonest businessmen involved in fraudulent activities and to reduce the number of such violations, the Revenue Service informs LETA.

The Revenue Service also notes that tax evasion creates unjustified advantages for companies involved in fraud schemes and affects honest companies’ competitiveness. Furthermore, tax evasion also makes it harder for the state to provide quality social protection, education, healthcare, and security services.

One of the latest developments in tax evasion is reprogramming electronic cash registers and systems in order to conceal the full income amounts and therefore reduce the amount of taxes payable into the state budget. According to tax control measures carried out by the Revenue Service, such violations are established the most often at public catering, dentistry, and retail trade enterprises.

For instance, an inspection at one public catering company, a restaurant in Riga’s Old Town, established that the company’s incomes reported to the Revenue Service in 2014 had been reduced by EUR 337,500 as a result of reprogrammed cash registers. According to initial estimates, the amount of unpaid taxes was approximately EUR 70,000 last year. A criminal case was opened following the inspection.

At the moment, the Finance Police of the Revenue Service investigate fourteen criminal cases that deal with reprogrammed cash registers and counterfeit receipts. The implicated companies represent various sectors – construction, trucking, transport services, fuel trade.

In 2014, 195 electronic cash registers and systems were inspected across Latvia on May 7 this year. Violations were ascertained in 81% of the inspections.

In total thus far this year, the Revenue Service has carried out 775 inspections at trade and services companies that use cash registers. Violations were ascertained in 65% of all cases.

The Revenue Service has proposed several legislations to increase the responsibility of companies found guilty of having reprogrammed cash registers and tax evasion, as well as companies that reprogram cash registers.