The State Revenue Service of Latvia to cooperate with the World Bank for the more effective administration of taxes

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The State Revenue Service (SRS) has established cooperation with the experts of the World Bank in order to strengthen the capacity of the SRS for the more effective administration of taxes within the framework of the European Commission support project. The goal of the project is to strengthen the capacity of the SRS by providing support for improving the fulfilment of tax revenue and implementing medium-term tax policy guidelines. The project is fully financed by the European Commission.

The project programme will feature three main areas: prevention of evasion of VAT payments, including strengthening of control functions; improvement of the analytical ability of the SRS, including analysis of the tax wedge, as well as training of employees in several areas, i.e. exposure of VAT fraud, identification of “envelope” salaries, e-commerce control, etc.

The first working meeting of experts from the Ministry of Finance, the SRS and the World Bank took place on 18 and 19 December a.c. During the meeting, the parties agreed on the activities of the first stage, which will be commenced in February 2018 and will be related to the improvement of the method for determining the VAT wedge and the determination of effective methods for combating VAT fraud.

Technical support will be provided by the World Bank. This will include the revision of the legal framework in order to strengthen the abilities of the SRS to prevent and prove cases of tax evasion, as well as recommendations on effective methods for preventing VAT fraud.

In order to strengthen the analytical capacity of the SRS, the World Bank in cooperation with SRS experts will determine modern analytical methods during the project in order to identify the weaknesses of non-declaration or evasion of taxes. For achieving the purpose, the SRS will improve methods for calculating the VAT wedge and master methods for determining the CIT wedge. This will allow recognising and segmenting tax evasion in a more effective manner according to the type of the sector and different groups of taxpayers, as well as modelling the most suitable preventive or sanctioning actions of the SRS.

Within the framework of the project, attention will be drawn to the identification of serious discrepancies in business segments with large cash turnover, to the identification of cases of declaration of insufficient income, etc.

The project is planned to be implemented within three years, i.e. from 2018 to 2020. It is financed by the European Union using the Structural Reform Support Programme. The European Commission and the World Bank share a common goal to shape competitive economies and encourage growth-stimulating reforms: goals of the Europe 2020 strategy, which are based on smart, sustainable and inclusive growth.