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Economic Diary of Latvia. Banana republic and skeletons in closets

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvian State Revenue Service, which lately has been positioning itself as a service organization that does not punish businessmen, but rather helps them, has quite a few skeletons in its closet, as it turns out.

The scandal regarding some of SRS’ employees that live quite wealthy lives received a continuation this week in the form of a protest outside of the Cabinet of Ministers. Participants of this protest demanded the government and the finance minister to dismiss the head of SRS Inara Petersone. However, Finance Minister Dana Reizniece-Ozola promised Petersone support in cleaning up SRS of dishonest workers, not dismissal. Petersone has been tasked with preparing a list of potentially dishonest employees and proposals for getting rid of them. According to the minister, it is important to understand how Estonia with 1,000 tax service employees manages to collect more taxes than Latvia with 4,000 tax service employees.

Everything began with LTV Low Blow programme’s report about relatives of SRS employee Roberts Dirnens and his brother Kaspars Aleksandrovs owning expensive cars and major real estate properties. It is suspected that money used to procure those properties came from money laundering schemes.

The brothers received inheritance from their mother worth USD 500,000. Robins Dirnens – Roberts Dirnens’ 23-year-old son – already owns two brand new apartments, land in Riga and elite Sunisi cottage area in Garkalne, all considering his father’s salary of EUR 800.

Aleksandrovs’ daughter, Madara Dirnena, who is also a member of the board of the recently founded Re&Law Consultation, has already bought four cars: a shuttle bus, two exclusive Range Rover cars and an expensive BMW model (worth EUR 250,000).

Prime Minister Maris Kucinskis was furious about this: ‘I have a question – where are interior security services and all other responsible services looking?’

It seems his complaints fell on deaf ears, because deputy director general of SRS and head of the service’s security department Aigars Indzens attended the press-conference dedicated to the explanation of the situation with suspicious financial state of SRS employees wearing Carrera Tiger Wood wristwatch. This fact was reported by Bez Tabu programme of TV3. According to information from the programme, the price of that watch in Latvia is EUR 4,100. Undzens’ salary was EUR 1,867 in 2015. According to his declaration, he earned EUR 32,498.20 from his salary in SRS in 2014. He also received EUR 100.24 in the form of deposit interest. He also has savings worth EUR 48,514.80 in the bank. He also owns a Mini Cooper and an apartment in Bauska.

The best possible result with the lowest possible cost

Considering the aforementioned facts, the recent announcement from Finance Minister Dana Reizniece-Ozola about Latvia’s entry into Organisation for Economic Co-operation and Development and how the country would cease being a banana republic came as an insult.

One of the main advantages of membership in OECD serves as guarantee for investors, a seal of quality. Because the country that is a member of OECD is more attractive for investors, it also contributes to the influx of investments.

Having a tax service with a reputation as described above will make it very hard to get a seal of quality. As BNN had previously reported, talks regarding Latvia’s membership in OECD have been delayed by a year. It was previously planned that talks would conclude in 2015. However, the assessment process went for too long. In addition, it is set to continue in 2016. In particular, OECD published a report in October 2015. In it, the organization stated serious concerns about the level of corruption in Latvia’s banking sector. OECD experts expressed concerns that 14 out of 20 banks registered in Latvia service foreigners, whose deposits make up more than half of the EUR 30 billion invested in Latvia’s banking system.

First and foremost quality of OECD is that this organization has leading expertise in the field of economic analysis, economic forecasting and ways of solving problems in the field of public administration of virtually all spheres of activities. OECD carried out enormous analytical work in many different areas. This includes investments, corporate management and state administration, pensions, education, fisheries, ecology, etc. Based on this analysis, the organization comes up the best possible practices or optimal solutions to achieve the best possible results with the lowest possible costs.

Activation of the previously inactive

In a sense, SRS has managed to achieve the best possible result with the lowest costs. However, this accomplishment will be viewed in detail by law enforcement institutions.

Employment seems to have become another field in which it was possible to achieve a good result with only available resources. As reported by the Central Statistical Bureau of Latvia, the country’s unemployment level was 9.9% in 2015, which is 0.9 percentage points lower than the year before. In addition, employment growth took place not merely because of the reduction in the number of the unemployed, but also because of inclusion of previously inactive people in the market.

The labour market will continue heating up this year, experts believe. It is expected that the proportion of job seekers will drop below 9%. But even now it is clear that unemployment for people with skills in demand has decreased to the pre-crisis level. Although unemployment for less qualified labourers remains high, it is expected to decline following economic growth.


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