Analytics, Education and Science, EU – Baltic States, GDP, Latvia, Legislation, Shadow economy

Friedrich Schneider at SSE university in Riga. BC's photo.

According to the calculations, shadow economy in Latvia has reduced during the past couple of years. The study reveals that shadow economy in Latvia in 2014 was 24.7% of GDP, in 2013 – 25.5% of GDP, in 2012 – 26.1% of GDP, in 2011 – 26.5% of GDP, in 2010 – 27.3% of GDP, in 2009 – 27.1% of GDP.

Schneider's study indicates that shadow economy in Latvia is slightly lower than in Lithuania and Estonia, where it is said to be 27.1% of GDP.

The average level of shadow economy in Europe (based on calculations for 25 countries) is 18.5% of GDP. The lowest shadow economy is in Austria – 7.8% of GDP, followed by Netherlands – 9.2% of GDP, and Great Britain – 9.6% of GDP.

Schneider's calculations differ from the conclusions of Latvian researchers Arnis Sauka and Talis Putnins, according to whom, shadow economy in Latvia has increased in 2013, while in Lithuania and Estonia – reduced. According to their study, shadow economy in Latvia in 2013 was 23.8% of GDP, as compared to 2012, when it was 2.7% lower.

Schneider said that these differences can be explained with the fact that each study used different data – different initial values, different terms or definitions, etc. Schneider said that his study omitted criminal activities, such as drug trade. He interprets shadow economy as tax evasion.