Police: Envelope wages and fake transactions still widespread in Latvia
Tax and Customs Police chief Andrejs Grišins says Latvia's shadow economy still exceeds 20%, driven largely by unpaid personal income tax and VAT evasion. Companies increasingly register abroad to formally employ Latvian workers while dodging domestic tax obligations.
The head of Latvia's Tax and Customs Police, Andrejs Grišins, has described how the country's shadow economy continues to exceed one-fifth of the overall economy, with unpaid taxes forming a major part of it. Personal income tax remains the most commonly evaded, followed by business-related taxes and value-added tax (VAT).
Undeclared workers and envelope wages
According to Grišins, one of the most common violations involves people being hired for work without being officially registered as employees. Another widespread practice is the so-called envelope wage, where a worker is formally employed but only part of their actual income is reported, allowing the employer to underpay taxes.
Labor leasing through foreign companies
Grišins noted a growing scheme in which a company is registered in another European Union country while formally employing Latvian residents there. That foreign company then supplies these same workers as leased labor to businesses in Latvia. Police view this as a deliberate attempt to avoid tax obligations in Latvia, and say such cases can be proven through close cooperation with counterparts in other countries.
Link to money laundering
Paying wages "in envelopes" requires cash, so these schemes are often linked to money laundering. Grišins pointed out that organized crime groups are frequently involved in this process, offering money-laundering services to businesses, alongside VAT fraud schemes worth millions of euros.
