Experts Call for Simplified Taxes in Construction to Reduce Shadow Economy
Shadow economy in construction has decreased but remains the highest among sectors. Experts recommend motivational tools such as tax breaks for home construction and renovation.
Last year, the shadow economy in the construction sector decreased by 4.3 percentage points compared to 2024, yet it still holds the highest share among all industries in Latvia. To further combat the gray market, experts argue that repressive measures are no longer effective and that incentive-based approaches are needed.
Arnis Sauka, professor at the Stockholm School of Economics in Riga and director of the Center for Sustainable Business, stated on the program "Spried ar Delfi" that repressive tools have exhausted themselves. He called for considering tax relief measures, such as for the construction or renovation of a primary residence. Sauka emphasized that with such measures, "no one would smuggle and cheaters would have no advantage."
He was joined by Guntis Āboltiņš-Āboliņš, chairman of the Construction and Real Estate Development Committee of the Latvian Chamber of Commerce and Industry. Both experts believe that a simpler tax system and targeted benefits could significantly reduce the shadow economy in construction, promoting fair competition and legal operations in the sector.
