Latvia: employers will have to justify to the tax authorities why they pay low wages to their employees

In a bid to do more to tackle the practice of paying parts of salaries in the form of undeclared (non tax compliant) cash, the State Revenue Service (VID) will be submitting amendments to the Law on State Social Insurance in the forthcoming Finance Law that will see a shift in the burden of proof over to employers and will require them to justify the reason why the declared salary levels are low. The head of the VID made the announcement on 13 July and the amendments are to target companies paying significantly lower wages than the relevant sector average level as per VID statistics. Recourse to compensation amounts as part of reduced activity measures (such as short-time working) has revealed a number of problems arising from the informal economy, such as employees receiving very low compensation payments because of the fact that they were receiving part of their salary ‘in an undeclared envelope.’