On Thursday, 12 September, Janis Bordans, the Minister of Justice met with Ieva Jaunzeme, the Director General of the State Revenue Service (SRS), in order to agree about the necessary measures for combating the shadow economy.

In order to fight with shadow economy and identify payers of envelope salaries in a more effective manner, J.Bordans and I.Jaunzeme agreed about information exchange between the Administration of the Maintenance Guarantee Funds (AMGF) and the SRS. Further on, the AMGF will pay special attention to the financial status of those who fail to pay maintenance, providing data exchange with the SRS about the debtors, whose official income fail to correspond with their life level.

J.Bordans indicated that maintenance of a child if a duty of parents, the failure to perform of which could not have any justifications. Therefore, it is important that not only the State demonstrates zero tolerance towards malevolent maintenance defaulters, but also the employers, who pay the minimum salary officially to the maintenance debtor, but the rest of compensation - in “an envelope”.

The MJ purposefully improves the maintenance system, providing for both, new possibilities for debtors to be involved in payment of maintenance within the framework of their financial possibilities, as well as new restrictions of defaulters to pay maintenance. AMGF data show that approximately 5,000 defaulters to pay maintenance receive a minimum salary as a labour payment from their employer. In order to prevent the risk of envelope salaries and fight with this component of the shadow economy in the more efficient manner, the SRS will use the received information for its examinations about the possible failure to pay taxes in full amount.

During the meeting both parties agreed on the support from the SRS and use of the Electronic Declaration System for communication of the Register of Enterprises with companies, who have failed to fulfil the obligation determined by law to disclose their beneficial owners, and will be subject to the simplified liquidation proceeding without involvement of the court.

The MJ and the SRS agreed to cooperate also on cleaning of the commercial environment from dishonest merchants, paying special attention to combating the so called “phoenix” companies, which are established with a purpose to become insolvent or be liquidated before they have managed to pay taxes and settle accounts with other creditors, at the same time transferring the commercial activity without debts to another company. Besides, also the possibilities were discussed to take over the positive experience in combating VAT fraud schemes from Poland, where they have managed to significantly reduce the VAT gap indicators - from 24.2% in 2015 to 7.2% last year.

Also Edgars Licitis, the Director of the Administration of the Maintenance Guarantee Fund, and Guna Paidere, the Chief State Notary of the Register of Enterprises, participated in the discussion.