A press release of 18 December 2017 announced that the World Bank is to assist Latvia’s tax administration to increase tax collection by improving revenue mobilization and reducing compliance costs. The project is partly financed by the European Commission’s Structural Reform Support Service.
It is estimated that the shadow economy of Latvia is around 25% of GDP, compared to an OECD average of 14%. A more effective tax administration is therefore a priority in ensuring that the tax system is fairer and more efficient. The expertise of the World Bank will now used to tackle the problem.
The analytical work of the World Bank is to focus on value added tax (VAT) tax evasion; compliance management and audit; and the analytical capacity within the tax administration in Latvia. The various forms of VAT fraud will be analyzed and proposals made for how to effectively deal with VAT fraud in a number of different sectors. Methods and tools will be developed to measure the VAT gap and analyze it by industry type and business segment. The World Bank will also provide support and policy advice to experts within Latvia’s Finance Ministry and State Revenue Service.
