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Ceturtdiena 24.08.2017 | Name days: Boļeslavs, Bērtulis

Global economic crime spread; Latvia has the highest VAT shortfall of GDP

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEconomic crimes against enterprises and other legal persons continue to grow in the world. According to PwC 2014 annual report on global economic crime, approximately 37% of respondents admit to have become victims of economic crimes (compared to 2011, this is an increase of +3 percentage points).

In addition to the aforementioned figure, 25% admit to have become victims of cyber attacks, because fraudsters now often use high-tech solutions to acquire what they need.

The PwC survey, which is the most large-scale one in the world, concluded that theft remains the most popular type of economic crime in the world, mentioned by 69% of respondents. Theft is followed by public procurement fraud (29%), bribery and corruption (27%), cyber crimes (24%) and accounting fraud (22%). Other types of crime include human resource fraud, money laundering, theft of intellectual property or information, mortgage fraud and tax fraud.

‘Economic crime has become a truly borderless threat. The reality of fraud is that it can impact a company’s revenues as directly as other business and market forces,’ – said Steven Skalak, partner in PwC’s Forensic Services practice and lead editor of the global survey.

Skalak adds that economic fraudsters continue to function. They adapt to such ever-changing global market conditions as implementation of new technologies and expansion of newly-developed countries.

He adds that the situation is only made worse by the financial impact economic crimes have on a wide range of enterprises. Economic crimes ruin internal processes, reduce employees’ honesty and reputation of companies they work for.

Where does economic crime take place?

Economic crime is a wide-spread and global problem. In a regional perspective, economic crime is present most notably in Africa, where 50% of respondents admit to have become victims (59% in 2011). It is followed by North America (41%), Eastern Europe (39%), South America and Western Europe (35% each), Asia and countries of the Pacific (32%) and the Middle East (21%).

Respondents from 65 countries and territories admit that they have had experience with economic crimes at one point or another. Respondents from South Africa note the highest level – 69% (60% in 2011). Crime rates continue to grow rapidly in Ukraine – 63% (36% three years ago), Russia – 60% (37% in 2011) and Australia – 57% (47% in 2011).

The survey also mentions eight newly-developed countries (Brazil, Russia, India, China, South African Republic, Turkey, Mexico and Indonesia), where 40% of respondents admit they have experienced economic crime in the way of outflow of riches.

Which sectors suffer the most?

Economic crimes have the highest impact on financial sector, retail trade and consumer goods sector and communications sector. Nearly 50% of respondents in each sector admit to have become victims of economic crimes at some point. Financial services organization sometimes become victims of large-scale cyber crime and money laundering victims. Retailers and communications companies often suffer the most from thieves.

How to uncover fraud?

It is concluded in the survey that 55% of all economic crimes are uncovered thanks to internal organization measures. These include reports about suspicious deals, internal audit or fraud monitoring management.

It is mentioned in the survey that respondents predict further increase in the number of economic crimes in nearly all categories in the neat future. Managers of different enterprises are mostly concerned over corruption and bribery.

A commentary about the situation in Latvia

PwC Taxes and Legal Consultancy Department manager in Latvia Ilze Rauza describes the situation in Latvia the following way: ‘Even though there has been no in-depth analysis of the situation in Latvia, the 2013 report about the shortfall of VAT in 27 EU member states reveals that Latvia is among those countries that have arguably the highest VAT shortfall of GDP. This indicates high rates of tax fraud in the country.’

Rauza adds that tax crimes in Latvia are only increased by problems such as – household financial difficulties, benefits of economic crimes and personal justification of committing such crimes. Without a doubt, tax fraud and other types of economic crimes create a serious distortion of competition in the country. Latvian courts are unable to handle the numbers of different tax disputes. However, there have been positive developments in VAT cases, which may contribute to the reduction of VAT fraud cases in a long-term perspective.

Ref: 103.109.109.4757


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  1. P. says:

    A better term for taxation is legalized plunder.

    Thumb up 0 Thumb down 0

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