Brivais vilnis: grey economy’s presence in fishing industry may be 40%
The total proportion of grey economy in Latvia’s fishing industry may be around 40%, says fish processing company Brivais vilnis chairman Arnolds Babris.
«I think its [grey economy] presence in the fishing industry is roughly the same as it is in the country – around 40%,» said Babris. He admits there are companies in the industry who do not pay taxes in the full amount. Unfortunately, the process of pushing such businesses from the industry is not going anywhere. Tax avoidance provides businesses with greater advantages to reduce self-cost, rather than improvement of efficiency. It is the duty of state institutions to prevent that, but there has not been a great amount of activity so far.
Babris believes grey economy in the fishing industry may decline only if the government decided to increase non-taxable minimum to EUR 500 instead of raising minimal wages, because it would increase production costs and producers would be forced to raise prices.
«I would recommend raising non-taxable minimum to EUR 500 instead of minimal wages. This would force many to exit the grey sector, and more jobs would appear in regions. And those EUR 500 would be spent in stores and returned to the state budget in the form of VAT. Areas in depression would liven up, and this would serve as a sign for investors. The gap between the poor and the wealthy would narrow down. Employment rates among the poor would improve as well,» says the chairman of Brivais vilnis.
He says the tax reform should focus on reducing grey economy. «SRS official said if SRS were to close today, honest taxpayers would continue paying regardless. The problem is that those who neither pay nor have any plans to start soon, and nothing is done about them. I suspect there is a system in place in accordance with which officials do everything to avoid taking any measures. We have to fight it and demand results. Right now it seems the tax reform is nothing more than a populist slogan, because it does not solve the main problem – the problem with tax avoiders,» says Babris. He adds that it would be good to reduce the number of officials in state administration three times to reduce unnecessary bureaucracy. Wages of the remaining officials should be increased to motivate them to work and make them more competitive with private businesses. It would also be a good idea to introduce personal responsibility for officials over consequences.