RIGA — As part of a series of measures to fight the shadow economy as its international lenders have insisted Latvia do, the country’s finance ministry is proposing a measure to restrict cash transactions on the wholesale market.

The proposal, presented to the Cabinet on Monday by finance minister Einars Repše, aims to limit tax evasion by unreported cash payments for goods, and would limit wholesale cash transactions to individuals with sole proprietary businesses and non-economic entities.

The ministry says the measure will [private_supervisor]encourage companies to pay Latvia’s 21 percent value-added tax on transactions and 26 percent income tax instead of avoiding them with unreported cash payments and also fight money laundering.

In addition, the proposal would ban cash transactions above 5,000 lats (€7,000) being conducted by any businesses besides sole proprietorships. Currently the limit is 10,000 lats.

Fighting the gray market

The proposal is part of a larger effort by the Latvian government to reduce the gray market activity. Estimates of the size of Latvia’s gray economy, i.e. legitimate businesses that are cheating on taxes and/or buying and selling goods under the table, vary from 15 to a whopping 40 percent, depending on the analysis.

To encourage honesty in a tax system where so many do otherwise and to help turn around the national government’s troubled finances, the Latvian finance ministry is formulating a set of new policies that reward honest businesses, including being put on a priority list for state procurements, a one-off cancellation of fines for late tax payments, restructuring outstanding tax debt and declaring previously undisclosed assets.

However, critics of the measure note that finance minister Einars Repše opposed a similar measure when he was serving as prime minister in 2002, and that similar measures in other countries such as Italy have failed because the culture of tax evasion has become too ingrained. [/private_supervisor] [private_subscription 1 month]encourage companies to pay Latvia’s 21 percent value-added tax on transactions and 26 percent income tax instead of avoiding them with unreported cash payments and also fight money laundering.

In addition, the proposal would ban cash transactions above 5,000 lats (€7,000) being conducted by any businesses besides sole proprietorships. Currently the limit is 10,000 lats.

Fighting the gray market

The proposal is part of a larger effort by the Latvian government to reduce the gray market activity. Estimates of the size of Latvia’s gray economy, i.e. legitimate businesses that are cheating on taxes and/or buying and selling goods under the table, vary from 15 to a whopping 40 percent, depending on the analysis.

To encourage honesty in a tax system where so many do otherwise and to help turn around the national government’s troubled finances, the Latvian finance ministry is formulating a set of new policies that reward honest businesses, including being put on a priority list for state procurements, a one-off cancellation of fines for late tax payments, restructuring outstanding tax debt and declaring previously undisclosed assets.

However, critics of the measure note that finance minister Einars Repše opposed a similar measure when he was serving as prime minister in 2002, and that similar measures in other countries such as Italy have failed because the culture of tax evasion has become too ingrained. [/private_subscription 1 month] [private_subscription 4 months]encourage companies to pay Latvia’s 21 percent value-added tax on transactions and 26 percent income tax instead of avoiding them with unreported cash payments and also fight money laundering.

In addition, the proposal would ban cash transactions above 5,000 lats (€7,000) being conducted by any businesses besides sole proprietorships. Currently the limit is 10,000 lats.

Fighting the gray market

The proposal is part of a larger effort by the Latvian government to reduce the gray market activity. Estimates of the size of Latvia’s gray economy, i.e. legitimate businesses that are cheating on taxes and/or buying and selling goods under the table, vary from 15 to a whopping 40 percent, depending on the analysis.

To encourage honesty in a tax system where so many do otherwise and to help turn around the national government’s troubled finances, the Latvian finance ministry is formulating a set of new policies that reward honest businesses, including being put on a priority list for state procurements, a one-off cancellation of fines for late tax payments, restructuring outstanding tax debt and declaring previously undisclosed assets.

However, critics of the measure note that finance minister Einars Repše opposed a similar measure when he was serving as prime minister in 2002, and that similar measures in other countries such as Italy have failed because the culture of tax evasion has become too ingrained. [/private_subscription 4 months] [private_subscription 1 year]encourage companies to pay Latvia’s 21 percent value-added tax on transactions and 26 percent income tax instead of avoiding them with unreported cash payments and also fight money laundering.

In addition, the proposal would ban cash transactions above 5,000 lats (€7,000) being conducted by any businesses besides sole proprietorships. Currently the limit is 10,000 lats.

Fighting the gray market

The proposal is part of a larger effort by the Latvian government to reduce the gray market activity. Estimates of the size of Latvia’s gray economy, i.e. legitimate businesses that are cheating on taxes and/or buying and selling goods under the table, vary from 15 to a whopping 40 percent, depending on the analysis.

To encourage honesty in a tax system where so many do otherwise and to help turn around the national government’s troubled finances, the Latvian finance ministry is formulating a set of new policies that reward honest businesses, including being put on a priority list for state procurements, a one-off cancellation of fines for late tax payments, restructuring outstanding tax debt and declaring previously undisclosed assets.

However, critics of the measure note that finance minister Einars Repše opposed a similar measure when he was serving as prime minister in 2002, and that similar measures in other countries such as Italy have failed because the culture of tax evasion has become too ingrained. [/private_subscription 1 year]

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