Latvia's tax authority may spend €400,000 to launch new simplified tax
Latvian MP Aiva Vīksna has proposed a simplified 10% tax aimed at drawing self-employed workers out of the shadow economy, but implementing it could cost the State Revenue Service around €400,000.
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A new tax proposal is under discussion in Latvia, aimed at people who currently work without paying any taxes at all. Saeima member Aiva Vīksna has put forward the idea of a simplified 10% tax rate designed for self-employed individuals operating in the shadow economy.
Who the tax would target
Among the professions the MP identifies as potential targets for the new tax are hairdressers, beauty specialists, private tutors, personal trainers, gardeners and plumbers — occupations where cash transactions without formal registration or tax payment are considered common.
Lessons from a troubled past
The proposal's author acknowledges that Latvia has already had a difficult experience with a similar scheme: the microenterprise tax previously caused significant problems and was widely exploited as a way to avoid tax obligations. That history has made policymakers more cautious about introducing a new simplified tax regime, though Vīksna believes a straightforward 10% rate could still encourage shadow-economy workers to formalize their activity.
Cost of implementation
Rolling out the new tax would require the State Revenue Service (VID) to spend an estimated €400,000. That price tag raises questions about whether the investment is justified, given that it remains unclear — and difficult to predict — how effectively the tax would actually succeed in bringing people out of the shadow economy.
