State losses over Gan Bei tax fraud close to €1m

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The Finance Police of the Latvian State Revenue Service (VID) has asked the prosecutor's office to launch criminal prosecution against nine persons in Latvia's Gan Bei tax fraud case, VID Deputy Director General Kaspars Cerneckis said at a press briefing on Tuesday, revealing that the state has lost close to €1m in unpaid taxes due to the fraud.

He said that the state had lost EUR 957,799.96 in unpaid value added tax (VAT) and personal income tax, reported LETA news agency.

Gan Bei started paying the tax debt in the summer and has so far paid about EUR 200,000 to the state budget.

The nine persons facing criminal prosecution in the case include five Gan Bei employees: accountants, IT specialists and cashiers, a CFO and a board member. Two persons are associated with a cash-register services company that had provided Gan Bei with illegal software. The suspects are the company's co-owner and his relative who had been providing cash-register services to Gan Bei. Cerneckis declined to identify the suspects.

Although the VID representative did not name the companies involved in the case, he said that the media speculations about the involvement of Gan Bei operator Lage Ko and Brio cash-register services provider had been correct.

Investigators questioned over 200 people and examined more than 150 units of computer hardware during the probe.

Cerneckis said that during the past year Gan Bei owner Lage Ko had increased employees' wages by about 50 percent, the company's turnover had also grown by about 50 percent and its tax payments had risen as well, which allowed for a hope that the company had ended its unlawful practices.

Several similar tax fraud cases were uncovered during the investigation of the Gan Bei case, and the Finance Police intend to send these cases for prosecution sometime next year.

Cerneckis also said that two organized groups developing illegal software for cash registers were busted as part of the investigation and that one of them had been involved with Gan Bei.

In December 2014, several Gan Bei restaurants operating at shopping malls across Riga were searched as part of an investigation into a cash register tax evasion scheme. The company responsible for maintenance of the cash register had supplied the restaurants also with software for illegal manipulation with the cash register data to avoid payment of value-added tax (VAT).

As reported, the organized group connected to the owners of the Gan Bei restaurant chain stole between EUR 700,000 to EUR 800,000 per month from the company's cash registers, or approximately 50 percent of monthly turnover. The Finance Police detained seven persons involved in this scheme.

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