Study: 46% of Latvian Entrepreneurs Consider Tax Evasion Completely Unacceptable

A recent study by SSE Riga professor Arnis Sauka and University of Zurich researcher Baiba Renerte has found that 46% of Latvian entrepreneurs consider tax evasion completely unacceptable. This figure is lower than in Lithuania and Estonia, where 56% of entrepreneurs share this view.

Based on a survey of 1,513 entrepreneurs across the Baltic states, the study shows that only a small proportion of entrepreneurs fully justify tax non-payment: 4% in Estonia, 10% in Latvia, and 12% in Lithuania. Meanwhile, 40% in Estonia, 44% in Latvia, and 32% in Lithuania partially justify it. These groups are the primary target for policies aimed at improving tax morale.

The authors conclude that the key factor influencing entrepreneurs' attitudes toward taxes is the industry's “ethical culture” infrastructure, rather than competitors' behavior. Industries with clear rules, real consequences for violations, and a culture of openness foster much greater tax compliance. Contrary to previous assumptions, competitors' actions do not significantly affect tax-paying readiness.

Furthermore, tax morale is more resilient in industries with a strong ethical culture infrastructure – external shocks, such as perceived ineffective use of tax money, affect morale 40% less in these sectors. The researchers stress that fiscal legitimacy – how the state spends tax revenue and communicates about it – is more important than aggressive enforcement policies.

For industry associations and businesses, the study indicates that industry-level ethical standards are not just a reputational issue but a crucial tool for strengthening the entire sector's resilience. The study was co-financed by the Latvian Science Council under the project “Unequal Shadows: Informality, Kinship, and Tax Morale in Latvia”.