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Programme: criminal process for Tokyo City envelope wages case commences

Following voiced suspicions regarding payment of envelope wages and tax avoidance at Tokyo City public catering company, Latvian State Revenue Service’s Finance Police has commenced a criminal process, as reported by LTV Aizliegtais paņēmiens programme with reference to unofficial information.

The programme’s journalist spent nearly five months working at the company as a dishwasher. Part of her wage was paid in an envelope.

Finance Minister Dana Reizniece-Ozola, commenting on the journalist’s uncovered facts, told the programme that this is more about the company’s dishonesty, because the size of taxes in public catering is optimal enough for businesses to afford to work honestly.

Payment of envelope wages in Latvia is a criminal offence. Although there have been discussions about providing administrative liability for recipients of envelope wages as well, no such measure has been implemented so far.

Gan-Bei restaurant was caught avoiding taxes two years ago. The company was applied with a fine of approximately EUR 1 million, as reminded by Aizliegtais paņēmiens programme. The fact of envelope wages being paid was never proved, charges were based on manipulations with cash register data.

The programme reveals that envelope wages at Tokyo City are paid to dishwashers, chefs and assistant chefs and hosts, the journalist also took videos of this happening.

Tokyo City restaurants are owned by three companies: Resto Court, Restograd and Stollons. Their total profits were EUR 1.3 million in the past two years. Russian citizen Sergejs Simarjovs is believed to be the actual owner of those companies. He was present at the opening of the first Tokyo City in 2010. He also owns 40 Tokyo City restaurants in St Petersburg.

SRS notes that Section 22 of the Law on Taxes and Duties prevents SRS from disclosing information about businessmen, including information regarding tax control measures and their results.

SRS performed inspections in more than 50 different catering businesses in Riga and Jurmala this summer. All kinds of violations were noted, with the most common ones being employment of people without contracts, non-disclosure of actual work time and payment of envelope wages. Also, instead of receipts, clients were given pre-receipts, which allowed companies to hide their actual turnover.

At the same time, SRS notes that control measures are regularly performed for businesses that are at risk of tax avoidance the most.

Nevertheless, using the «consult first principle», SRS asks businesses in the catering industry to perform clarifications in their declarations and sort out their economic activities to comply with Latvia’s legislation. SRS does admit that inspections will continue in the future because not all businesses are prepared to cooperate with SRS.

On 7 September, a protest was held outside of three Tokyo City restaurants in Riga to oppose envelope wages. According to the organizer of the protest act Māra Kursīte, the protest act was carried out to protect workers and attract society’s attention to envelope wages problem, small hourly rates, unpaid overtime, minimal social guarantees and even suspicions of customer fraud.

Dmitrijs Tribuncovs, representative of Restograd, says he has never met the organizer of the piquet. He allows that the entire act was ordered by competitors.

Tribuncovs also says the piquet’s information regarding envelope wages, small hourly rates, unpaid overtime, minimal social guarantees and customer fraud cannot be applied to Tokyo City, because Restograd has always been open for cooperation with SRS.

«It is no secret that SRS is currently performing massive inspections in restaurants. We are prepared to work with SRS and provide the necessary information,» said Tribuncovs.

The manager of Tokyo City says the average wage in the restaurant is EUR 400 – EUR 500. He adds that the company works to raise the wage index to EUR 600.


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