Financial Services, Latvia, Taxation, Wages

Compared to a year before, the share of undeclared wages grew by 7.4 percentage points, from 28.2% to 35,6%.

The Revenue Service noted that under the amendments to the Microenterprise Tax Law, effective as of 2017, the microenterprise tax rate has been raised from 9% to 15%. To compensate for the new tax expenditure, some microenterprises “optimized” wage costs, reducing declared income and increasing undeclared income.

In 2017, undeclared microenterprise tax liabilities amounted to an estimated EUR 35.6 mln, while declared but outstanding tax liabilities were worth EUR 9.2 mln. In 2017, microenterprises declared EUR 92.83 mln payable in microenterprise tax.

According to the Revenue Service, the microenterprise tax gap in 2017 made up 34.9% of all potential microenterprise tax liabilities. The microenterprise tax gap widened by 6.3 percentage points from 2016.

The segments showing the highest percentage of undeclared wages in 2017 included programming (63.1%), logistics (62.8%), taxi services (55.9%), other ICT services (47.9%), advertising services (38.5%), accounting, bookkeeping, audit and tax consulting services (37%).