Latviski English По-русски
Friday 20.07.2018 | Name days: Ramona, Ritma

Economic Diary of Latvia. Finance Ministry vs. laundries

(No Ratings Yet)

This week was rich with events. Particularly, it became known how the Finance Ministry will track companies and uncover schemes of, so to say, «tax optimization». Good news first though.

Of pros and cons of investor visas

The Internal Affairs Ministry has presented its annual report on the amount of money that was invested in Latvia in exchange for residence permits. During the period from July 1, 2011 to June 30, 2012 the volume of investments reached 154.08 million LVL – more than twice the amount of investments of last year. The most popular method of acquiring a residence permit is still through purchasing real estate. During this period, foreigners bought objects for a total amount of 126 million LVL, which is 162% more than last year. The second most popular method – investments in company capitals. Foreigners invested a total amount of 4.99 million LVL in 70 different companies, which is 152% more than last year. In total, since the becoming in force of the amendments to the Immigration law two years ago, foreigners brought Latvia 220.49 million LVL.

The reports of the ministry will be submitted to the Defence, Internal Affairs and Corruption Prevention Commission for review in the nearest future. The commission will then evaluate the influence of such investments on Latvia’s economy. Only two negative opinions are known about this. National parties believe these investments to be bad for our country. Economy Minister Daniels Pavluts, on the other hand, sees nothing negative. He notes that a number of Russian businessmen first buy real estate in Latvia, then relocate production here.

Port inspections

While one parliamentary commission is inspecting money flow, the other intends to, finally, clean up Latvian ports. The Saeima National Economy Commission attracted experts from the World Bank, who will inspect the activities of our ports this autumn. The author of this initiative, the head of the National Economy Commission Vyacheslav Dombrovskis believes this industry to be one of the least transparent in our country. According to him, inspection will last for three to six months. Specialists of the World Bank will conclude how effective the current management model is and what reforms are necessary to raise the competitiveness of Latvian transit. Results of the audit will then become the foundation of the reform for the port management system. According to initial calculations, services of the World Bank specialists will cost the State budget 10 thousand LVL.

It is unclear though, why our parliamentarians did not turn to the specialists of our own State Audit Office, who not only performed audits at ports on multiple occasions and prepared reports with detailed analysis of flaws and violations and how to fix them.

Doing business in Latvia

It also became known that Lithuania has all the chances to outrun Latvia in the global Doing Business rating, which is compiled every year by the World Bank and the International Finance Corporation, assessing business climate in 183 countries of the world. Latvia unexpectedly made a leap of ten positions in the last year’s rating: from 31st to 21st position. As a result, Estonia (24th) and Lithuania (27th) were left behind our fair country for the first time in many years. Latvia earned a high place in the rating thanks to a sufficient progress in such areas as business initiation, bankruptcy of companies and electric network connection. However, our neighbours have the chance of climbing higher than Latvia in the upcoming Doing Business 2013. Lithuanian Economy Ministry expects to climb ten positions – to the 17th spot. As the Verslo zinios newspaper writes, the county managed to achieve progress in seven out of ten main rating criteria. These criteria are: business initiation, issue of construction permits, real estate registration, acquiring credits, foreign trade and insolvency process.

Latvian Economy Ministry followed Doing Business when preparing improvements of the country’s business environment in 2012. It was expected that the realization of 30 measures that were included in the plan will allow the country to be included in the first twenty and preserve its conquered positions in a long-term perspective. However, only four out of 30 stated measures were completed by June 1, 2012. Economy Ministry explains the small progress of the plan’s realization with the fact that most measures are planned for the second half of the year. Meanwhile, the institution called all involved structures to perform active steps in realizing the planned measures, so that the planned goals are guaranteed to be reached by the end of the year.

Finance Ministry vs. «laundries»

In 2013, the Finance Ministry wants to increase control over companies to improve tax collection. Particularly, this applies to companies whose officials are registered at, for example, shelters (there were 729 companies on August 17, 2012), Riga, or some other unspecific location stated as place of residence. Having closed these «laundries» for VAT, the budget will receive an additional 5.5 million LVL and 6 million LVL each on 2014 and 2015. Furthermore, the Finance Ministry plans to tighten control on advance payments for economic activities, ones companies usually give their employees. People at the finance institution believe that, in most cases, employees receive salaries that are not subject to PIT and social tax. Ideally, a receiver of such advance payments should present receipts that would prove that those funds were used as intended. But most companies do not do this. The Finance Ministry believes this problem can be resolved by clarifying the rules regarding keeping accounting. These clarifications will state the period an advance payment receiver is obligated to present documents of the use of the received funds. The institution hopes to give the budget an additional million LVL per year by doing so.

It was planned to add a larger amount by obligating businessmen to report the profession of specialists they plan to employ and the person’s daily working hours. As a result, fiscals will be able to compare income of specialists of more or less the same profile at different companies and uncover envelope salaries. Nevertheless, most of the funds – 15 million LVL per year – the Finance Ministry hopes to receive using a natural way – economy growth.


Leave a reply

Estonians buy alcohol in Latvia; country loses EUR 20 million in six months

Latvian stores located close to the Latvian-Estonian border have sold 1.6 million litres of strong alcoholic drinks in the first half year of 2019. This means Estonia has lost more than EUR 20 million in taxes, according to data from Association of Estonian Alcohol Producers and Importers.

Lithuania’s Election watchdog slams ruling LFGU over popular TV series

Political messages can be channeled in various ways and the ruling now Lithuanian party, LFGU has chosen a very delicate way of the communications – through a TV series featuring the beauty and the ambiance of Naisiai, a picturesque settlement in Siauliai district.

Association: around 3,3000 people know of their HIV infection but receive no treatment

HIV remains a serious problem in Latvia – around 3,300 people are aware of their status but receive no treatment and continue spreading the infection. Because of that, it is necessary to act quickly for Latvia to lose its status as HIV kingdom and limit the spread of the infection, says Baltic HIV Association, informing decision-makers and responsible officials in institutions and hospitals about the HIV/AIDS situation.

Driver shortage may force reduction of international road haulage volumes

Latvia’s road haulage companies have started experiencing shortage of drivers. On top of that, if employment conditions for residents of non-EU member states do not change, it may be necessary to reduce the volume of road haulage volumes, says Latvijas auto president Valdis Trēziņš.

Lattelecom’s turnover up 9% in first half-year of 2018

Lattelecom Group’s turnover reached EUR 98.7 million in the first half-year of 2018, growing by 9% in comparison with the same period of 2017, according to unaudited financial results.

1,140 fewer births registered in Latvia in 2017

Since 2016 the number of births in Latvia is declining again. Compared to 2016, a total of 1,140 births fewer were registered in 2017. Also, the provisional number of births registered over the first six months of 2018 (9,664 children) is by 664 children smaller than that registered over the respective period of 2017.

Citadele Bank decides to reform Lithuanian subsidiary as a branch office

Citadele Bank has decided to reform its Lithuanian subsidiary as a branch office, as confirmed in the statement the bank submitted to Nasdaq Riga.

Russian pension age hike discussed amid protest outside Duma

As the Russian paliament votes on the proposal to gradually increase he pension age to 65 for men and 63 for women, some 200 people were seen protesting against the reform in Moscow.

Corruption watchdog chief says bureau has done no illegal actions

After going through Corruption Prevention and Combating Bureau’s past investigative activities, the bureau’s chief – Jēkabs Straume – found it confusing that officers often took no appropriate actions after acquiring evidence or receiving indications regarding necessary steps.

Illegal border crossings to Estonia on rise after Russia World Cup

Football fans with temporary residency permits of the Russia World Cup, or fan Ids, are trying to illegally cross the Russian border with Estonia, a member of the European Union.

Estonian 13-year-old lethally overdoses fentanyl

Estonian prosecutors have accused a 15-year old of negligent homicide after a girl, 13, passed away from fentanyl overdose.

Wild party competition and political chaos – what goes on during pre-election period?

If we compare who fought under 5% barrier some 8-12 years ago, we will see Daugava’s diggers, head nurse parties and eurosceptics parties whose ability to create some form of a working party programme was very weak. Now political parties’ competitiveness is so high that up to eight parties may successfully overcome the 5% barrier and this points to healthy competition. At the same time, in all this competitive mess it is impossible to understand where parties get financing and access to media resources, politologist and Providus think tank head researcher Iveta Kažoka commented on the pre-election period in an interview to BNN.

Google fined with EUR 4 billion for competition abuse with Android

Google has been fined by the European Commission with a fine of 4.34 billion euros illegal abuse of its dominant market position and the executive of the European Union is set to move on with investigations into other possible practices of unfair competition by the U.S. company.

Turkey removes post-coup attempt state of emergency

The government of Turkey has decided to end the nationwide state of emergency that was imposed in 2016 after a failed coup attempt, state media have reported.

House arrest of Russian theatre director Serebrennikov extended

A court in Russia prolonged the house arrest of Kirill Serebrennikov, a leading Russian theatre and cinema director, until August 22 as he waits for a criminal trial charged with of embezzlement of state funds.

NCP picks Jurašs, Strīķe, Bordāns, Feldmanis and Šuplinska as its headliners

Latvia’s New Conservative Party has picked Juris Jurašs, Juta Strīķe, Jānis Bordāns, Krišjānis Feldmanis and Ilga Šuplinska as its headliner candidates for Saeima elections.

Bank: residents spend an average of 50 to 100 euros on health every quarter

84% of residents aged 18 to 74 have used medical services in the past three months. Only 5% of all costs were covered by health insurance, according to a survey by Norvik Banka.

Countries sign third Rail Baltica co-financing agreement

Connecting Europe Facility co-financing agreement for the construction of Rail Baltica railway infrastructure was signed by participating member states on 13 July. The value of the agreement is EUR 130 million. CEF’s contribution will reach EUR 110 million, which is equal to 85% of all applicable costs, as confirmed by RB Rail communication consultant Ligita Brodiņa.

Saeima plans to increase compensations for child victims

Saeima’s Legal Affairs Committee supported for the third reading amendments that provide for increasing state compensations to child victims.

Sweden asks for help to fight wildfires behind Arctic Circle

Sweden has called for help of European Union neighbours to put out wildfires, some raging in territories behind the arctic circle.

Latvijas Krajbanka administrator recovered EUR 1,038 million in June

The administrator of the liquidated Latvijas Krajbanka recovered EUR 1,038 million in June, which is 6.9 times more than a month prior, according to the official outlook published in Latvian Herald.

Estonians warned of heat wave, high UV radiation

Weather forecasters in Estonia have warned the population of hot weather conditions, because temperatures are forecast to reach 30-31 degrees Celsius this week.

Minister says police have leads in Bunkus murder case

Police have found new leads in the murder case of former insolvency administrator Mārtiņš Bunkus, said Interior Affairs Minister Rihards Kozlovskis in an interview to 900 seconds programme of LNT.

Average EU market prices for dairy products grew in May

Compared to April, dairy product prices in Latvia did not increase in May. In the EU, however, average market prices continued growing in May, according to information compiled by Agriculture Ministry’s Market and Direct Support Department.

ECHR: Russia violated human rights in Pussy Riot and Politkovskaya cases

The European Court of Human Rights (ECHR) has found Russia guilty of human rights violations in its handling of two high-profile cases – its arrest and conviction of Pussy Riot protest group in 2012 and the investigation into journalist Anna Politkovskaya's murder.