Tax service head: Only 'illogical' cash flow will be examined

One of the challenges of the shadow economy plan is to monitor cash flow more closely at ATMs. The State Revenue Service (VID) is not interested in every cash deposit but only in illogical cases, the new head of VID Baiba Šmite-Roķe said in an interview on Latvian Television March 5.

Referring to economist Arnis Sauka's study on the volume of the shadow economy in Latvia and the Baltic States, Šmite-Roķe emphasized that Latvia has a very low tax morale. Much of the shadow economy is made up of organized crime or deliberate fraud, paying the so-called envelope salaries (unregistered cash payments). But it's also made up of small entrepreneurs who don't know or understand what needs to be done. Therefore, the first real challenge in how VID can help mitigate the shadow economy is to simplify procedures “so that small entrepreneurs feel it is cheaper and easier to pay taxes than to try to avoid them,” the VID leader said.

Unlike previous plans to combat the shadow economy, this one has a greater emphasis on cooperation between different state institutions. “We often forget to exchange information and analysis. If it is purposefully used to combat shadow [economy], there will be results,” Šmite-Roķe said.

“One example is the cash deposits into ATMs, which the public is worried about. We are not interested in every resident of Latvia, we are interested in these loud, illogical cases when a resident has no income at all but is paying into an ATM. Then we could really have a logical question as to what kind of money you deposit into an ATM,” the VID leader said.

She also said that this year the VID was ready to accept annual income declarations, which are traditionally accepted starting March 1, as early as the first minutes at midnight without any breaks.

More than 420 thousand declarations have already been filed by Tuesday morning, with more than 17 thousand residents repaid €9.7 million in tax returns.

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