Car market, Latvia, Legislation, Taxation, Transport

The majority of such deals are arranged through the ss.lv classified ads portal, where fraudulent automobile dealers employ various schemes to avoid paying value added tax. According to Kulbergs, it is not easy at all to buy a used automobile in Latvia so all taxes applicable are paid, said Kulbergs.

The amount of such fraud schemes has increased significantly over the past three years, therefore the State Revenue Service's efforts to eliminate the schemes are praiseworthy, added Kulbergs, although the Revenue Service's measures could have been more effective. "However, I don't support the Revenue Service's actions [in taking down the ss.lv portal]," said Kulbergs, pointing out that the Revenue Service should have better explained its actions. "Nevertheless, ss.lv is a mirror of the shadow economy," he said.

According to Kulbergs, the tax evasion schemes usually involve buying used cars in Germany and selling them via fictitious companies in Latvia, evading VAT. Therefore the Revenue Service's attempts to obtain information about such dealers from ss.lv are understandable. "It is not normal that automobiles in Latvia cost less than in Germany, and that is exactly because of VAT evasion," said Kulbergs.

He mentioned the example of Estonia, where authorities were inspecting used automobile lots and confiscated automobiles if the dealers were unable to prove that they had paid the taxes applicable.