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SRS: time to forget about non-traceability of envelope wages

Research performed and planned by Latvian State Revenue Service are a serious signal for the fact that it is time to forget about the illusion that no one will ever find out about people who are paid envelope wages, says SRS deputy director Dace Pelēka.

In order to continue following one of main priorities aimed at improving honest competition and reduction of grey economy, SRS has performed a large-scale data analysis and has calculated the level of tax debt in the country and separate sectors of the national economy. Calculations do not affirm the belief about envelope wage recipients and their employers, SRS notes.

«SRS has large volumes of data that help identifying taxpayers that pay envelope wages. By applying more and more modern analysis methods, SRS has begun tackling the existing tax non-payment problem. Data acquired from studies will help in the development of programmes based on taxpayers’ behaviour models to combat this problem,» Pelēka comments.

Finance Ministry’s Grey Economy Combating Coordination Department director Kārlis Ketners admits: «Large-scale and well-performed studies by SRS show that the service has improved and enhanced its analytical capacity. Data acquired from this study is very useful in the context of combating grey economy and will help us improve work with taxpayers in control, prevention and educational fields.»

Ketners expressed hope that studies like that will be performed in the future to help follow developments and plan administrative functions more accurately.

SRS emphasizes that when performing calculations regarding the debts of people who avoid taxes, focus was put on one of the most unpleasant signs – envelope wages. Results show that multiple dominating beliefs are not true. Opposite to established belief that all businessmen pay envelope wages, estimates by SRS show that 25% of people who are paid envelope wages work in the general tax regime and 19% of them work in the micro-enterprise regime.

The largest number of envelope wages is found in industries like retail trade, wholesale trade, as well as land and pipeline transport. Among the ten sectors of the national economy affected by envelope wages the most are construction, catering, real estate transactions and IT. Analysis of micro-enterprise tax payers reveals that envelope wages are paid the most often in IT, legal, accounting and individual services.

SRS notes that it is often said that most employees do not want to receive wages legally. Data, on the other hand shows that the main envelope wage risks are noted for groups of people who are already subjected to major discrimination risks on the labour market – mostly people of pre-pension age and low-qualified workers. This means that, unfortunately, residents from this group may be forced to accept envelope wages because they have no other choice.


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