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Economic Diary. Latvia Week 30 of 2012

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If it had not been for the idea of the State Police to create a registry of bank accounts of legal entities and individuals, this week could have been safely called very positive.

The police want to know everything

The State Police (SP) has announced the necessity to create a special registry of bank accounts of legal entities and individuals. They explain this, with reference to the experience of their German colleagues, with the following. Current procedure for acquiring information about the state of a bank account of a person or a company that attracted the attention of the investigation, the investigator needs to file in written requests to all Latvian banks and branches of foreign banks. This procedure is only allowed with the Court’s consent, which slows it even more. Consequently, the following step is also slowed – the filing of the Court sanctioned request about the state and operations of a given bank account. These delays, as ST notes, can prove to be troublesome during investigations related to money laundering or corruption: perpetrators have enough time to transfer the money before the punishing hand of justice reaches their bank accounts.

Representatives of the SP believe that this procedure can be shortened by creating a special registry, access to which will only be allowed to representatives of law enforcement institutions. This registry would include information in which banks does a given person have bank accounts, but not the information about the state of the said bank accounts. The SP would request the information concerning the state of a bank account using regular procedures – through the Court.

The Association of Latvian Commercial Banks (ALCB) reacted critically to this idea. «Creation of a bank account registry is a violation of the bank secret and confidential information, because it will contain information concerning bank accounts of all residents and all companies in the country. In reality, law enforcement institutions only require this information in relation to specific individuals, which make up an insignificant proportion from the total number. The wish to know everything about everyone is – the first step to making Latvia a police state!»- claims governor of ALCB Martiņš Bičevskis. He also said that this kind of data should be stored carefully, because it holds confidential information.

Speaking of secrets and how they are being kept. Latvia has seen its fair share of scandals related to information leaks with Latvian law enforcement institutions. For example, investigation documents about corruption in Latvenergo or the deciphering of telephone conversation recordings of government officials and journalists.

Fiscals serving businessmen

Admittedly, this week is not notable just because of the idea of the SP. There some good news: the period of registration as a VAT payer is planned to be halved in Latvia. According to current regulations concerning the application of VAT, the State Revenue Service (SRS) is obliged to make the decision about registering a given person within ten days. In practice, the entire process takes one week, according to the results of a survey of businessmen. Finance Ministry’s (FM) amendments that were given for review by the meeting of Secretaries of State provide for halving the waiting period to five days.

The ministry is acting in accordance with the 2012 business environment improvement plan. In truth though, the registration period reduction measure was part of the last year’s plan: at the time, it was planned to realize it before the beginning of 2012. It is expected that the change will improve Latvia’s position in the Doing Business rating of the World Bank in terms of the number of problems preventing starting a business. In 2011, the SRS made 11 364 decision in relation to VAT payer registrations. Currently, this status is required to be received by all companies in Latvia with annual revenue of 35 thousand LVL and more.

Tax amnesty

It also became known that the European Commission (EC) approved the Latvian «Law on Tax Support Measures» draft law, which includes a point concerning actual write-off of penalties and fines on budget payments for tens of thousands of companies that suffered from the crisis the most. The draft law offers tax amnesty participants to return the main amount of the debt, saved up until September 1, 2010, as well as 10% of the fine, to the state budget on deferred terms. In return, the SRS will write-off the tax payer’s remaining fine and all related penalties.

Even considering the fact that an according initiative was prepared in 2010, now its target audience became notable thinner. «A part of the businessmen that lost all faith in an operative resolution of this issue and the possibility to invest «amnestied» funds in saving the business, have already gone bankrupt, and will not be able to pay the state even the main amount. However, the «strongest ones» made it: and now, if the government and the parliament can adopt all necessary acts fast enough, the state budget will note an influx of millions of LVL by October, 2012. Business, on the other, hand will be able to use its liberated funds,»- says Jānis Endziņš, Chairman of Commerce and Industry – one of the key figures in the development of tax support draft law.

According to the data of the SRS, around 110 thousand taxpayers can participate in the «tax amnesty» program. This campaign will be applied on PIT, corporate tax, VAT, excise and customs duties. The SRS can offer a period of 60 months for the pay back of the main debt. The minimum amount for transactions on any kind of debt is set at 50 LVL.

To Latvia – by car

Finally, the last event worth mentioning: the change of one particular tendency. According to the State Border Service (SBS), more and more Russian citizens prefer to visit our country by car. The information from the SBS states that 141 436 foreigners came to Latvia in June, 2012. Nearly half of them (65 282) proceeded through Latvian-Russian and Latvian-Belarusian road checkpoints. Those were the places which saw an increase of work to do. Grebnevo checkpoint noted an exceptional rise: 11 0002 this year against 7 681 last year. Terekhovo checkpoint, on the other hand, became less popular: 11 490 and 13 620 respectively. This is mostly dues to the fact that the Riga-Moscow highway (especially on Tverskaya territory) is in a critical state, compared to the decent Pskov- St. Petersburg highway. Suffice to say, where there are tourists, there’s money. According to the Central Statistical Bureau of Latvia, foreigners left 379 million LVL in Latvia in 2011.


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