Analytics, Construction, Financial Services, Latvia, Legislation, Real Estate, Shadow economy, Wages

The presence of other elements of shadow economy in the construction sector is also much higher than on average in Latvia. The proportion of unreported income is 31.6% in the construction sector as compared to 19.9% in across the economy, and unreported employment reaches 23.5% against 9.6% on average in Latvia.

"The available statistics also point to the problem of envelope wages. Last year, the average gross monthly wage in construction was EUR 712, which is lower than the average gross monthly wage in Latvia," said Arnis Sauka, an associate professor at SSE Riga and a BASE board member.

The study also reveals that the corruption rate in construction is 17.9% against 7.6% in the whole Latvian economy.

Authors of the study conclude that undeclared pay and income are problems regardless of the size of the companies, while unregistered employment is more characteristic of smaller enterprises.

Overall, gray businesses make up 40% of the Latvian construction sector, as compared to 21.6% in Estonia and 20.1% in Lithuania.

A representative survey of Latvian building contractors shows that 58.64% avoid paying labor taxes, 25.91% fail to pay value added tax (VAT), and 15.45% avoid paying income tax.