Business leaders suggest shadow economy fixes

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The Latvian Chamber of Commerce and Industry (LCCI), the Latvian Employers' Confederation, and the Business Against Shadow Economy (BASE) association on Thursday presented their proposals for reducing the size of the shadow economy.

Proposals include abolishing excise tax on coffee, a monthly tax on taxis, measures against piracy, and a "receipt lottery".

The document presents proposals by members of the LCCI, Employers' Confederation and BASE, as well as proposals by state institutions that these business organizations support. These proposals are being discussed at the annual conference on combating shadow economy today, after which they will be submitted to the Cabinet of Ministers.

Businessmen propose that the government adopt a medium-term tax policy that would be linked up with the goals of the National Development Plan 2014-2020, and ensure full implementation of the tax policy. Latvia also needs to have stable and predictable taxation system, the labor tax burden has to be reduced, and compulsory social insurance contributions must be revised.

The business organizations also support mandatory health insurance, lifting corporate tax on small and medium-sized companies' reinvested profits, lifting excise tax on coffee, and others.

Another proposal is to introduce a monthly tax of EUR 286 per taxi that would replace personal income tax and social contributions, and lift the company car tax on taxis.

In order to reduce the administrative burden, business organizations propose the single-window system at state and municipal institutions, upgrades to the Public Procurement Law, and the single account concept similar to that of Estonia, where taxpayers make all tax payments into one account.

The industry figures propose a complex of measures to make the control measures and fines more effective, where penalties would be assigned faster, tax fraud would be a criminal offense, and the functions and salaries in public administration would have to be revised. The business organizations also call for harsher measures against illegal distributors of TV programs and pirated films.

Businesses represented by the groups believe that unregistered business activity in renting out real estate has to be restricted, dishonest businessmen must be kept out of security companies, and further measures have to be taken to straighten out the construction industry.

They also recommend organization of a receipt lottery, where consumers would enter their receipts into the State Revenue Service's database and participate in a lottery, which would also serve as a source of information for the Revenue Service's inspections.

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