Latvian tax service starts sending out vague alerts

Last week, the State Revenue Service (VID) sent letters to 5,000 Latvian residents because their bank account turnover significantly exceeds their declared income by at least EUR 20,000 per year or EUR 1,660 per month. 70,000 people in Latvia will receive such letters, Latvian Radio reports September 30.

The generic content of the letters, which does not provide specific information, has caused confusion among some residents, while representatives of the VID explained that the letter is only an invitation to contact the representatives of the service in order to clarify the situation.

Līga Leitāne, lecturer and researcher at the Faculty of Economics and Social Sciences of the University of Latvia (LU), said that at the moment, residents who have received notifications in the VID Electronic Declaration System (EDS) are confused about the generic content of the letters.

"It's not really right that you just get a generic letter and, therefore, at the moment I think some people are just kind of shocked, what to do now?

"And it could all be corrected if everyone was sent specifically - you declared this amount, the bank information says you have this amount and then people would understand what they have to collect information about, so that they can explain what they have done. Because there are a whole range of items where here and there may have been a movement of funds but that does not mean that it is a taxable transaction," Leitāne said.

Santa Garanča, Director of the VID Tax Compliance Promotion Department, explained that the content of the letter is generic since it will be sent to about 70,000 people in Latvia – those whose undeclared income exceeds €20,000 per year.

"We do not write a specific detailed amount because then we would not be able to send these, as we say, mass letters," said the VID spokesperson.

1,000 citizens have contacted the VID after receiving the letter, so Garanča from the VID explains how the difference between the declared income and the account turnover comes about.

"Every income exceeding €10,000 per year has to be declared. When you receive gifts, for example from people close to you and so on, you have to declare it, people forget.

"We are already seeing explanations like that - there was a father who sold his flat, it was agreed that he would give the money to his children, he did. No tax to pay, but it should have been declared. The other thing is that the person has several accounts, he transfers from one account to another, so there is, you could say, an artificial turnover. Family members transfer money between themselves to cover some expenses and maybe more, which is neither a gift nor income, but it is reflected in the account and creates this discrepancy. But, of course, we will be most interested in those situations where the discrepancy is large, and then we will assess in detail whether we should not also start control measures there."

This is one of the measures to fight the shadow economy. However, Leitāne from the University of Latvia argued that it is the public authorities that should first set an example of how to spend our common money frugally.

Currently, letters are sent by the VID to citizens via the VID EDS and will later also be sent by post to the declared place of residence. The VID will not send text messages and urges people to beware of fraudsters.

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