The World Bank will help Latvia improve its tax administration to achieve an increase in tax collection through better tax revenue mobilization and reductions of compliance costs, in cooperation with the European Commission. The Government of Latvia has solicited support from the Commission’s Structural Reform Support Service (SRSS) and an agreement has been signed between the World Bank and the European Commission.
The shadow economy in Latvia is estimated at close to a quarter of the official GDP level, compared with an OECD average of only 14 percent. While the share of the informal sector has fallen over the past decade, it remains large. Improving the effectiveness of the country’s tax administration is therefore a priority of the government.
“The World Bank, based on its recognized international expertise, is well positioned to work with Latvia on its tax strategy. We are sure that a fairer and more efficient tax system can be instrumental in helping the country build a stronger economy and reduce social exclusion,” said World Bank Country Manager responsible for Latvia, Carlos Piñerúa. “In our analytical work we will focus on three key areas: VAT tax evasion, compliance management and audit, and analytical capacity of the State Revenue Service of Latvia.”
The technical support will be provided by the World Bank, in cooperation with the European Commission’s SRSS. It will include an analysis of various forms of VAT fraud and propose recommendations on effective methods for addressing VAT fraud in specific sectors through appropriate control measures.
The World Bank will also develop methods and tools to measure the VAT gap by industry type and by business segment, such as large, medium-sized and small businesses.
The technical support provided by the World Bank will also include policy advice and hand-on support for the Ministry of Finance and State Revenue Service experts.
The new project has been funded by the European Union via the Structural Reform Support Programme of the European Commission. The European Commission and the World Bank share a common objective of building competitive economies and promoting growth-enhancing reforms – goals of the Europe 2020 Agenda which is built on three pillars of smart, sustainable and inclusive growth.
