Anti-money laundering chief warns about new VAT tax

RIGA - Latvia's top anti-money laundering official has said that the government decision to increase the value added tax will trigger an increase of fraud schemes in the country.

Viesturs Burkans, chief of the Latvian anti-money laundering service, said it was still difficult to forecast exact figures, but that the number of tax fraud schemes was certain to grow as a result of the measure. "I expect the issue to exacerbate and take more resources of the [money laundering] control service," the officer said.

In his words, already now about half of all fraud cases that the control service had sent to the financial police for investigation concerned tax fraud schemes.

The Latvian government has decided to increase the basic VAT rate to 21 percent from the present 18 percent, and the reduced VAT rate to 10 percent from 5 percent. Moreover, a number of goods and services that so far fell in the reduced VAT category will now be included in the basic rate category. These include the media and press subscription fees, as well as commercial TV and radio subscription.

The VAT rates are being raised as part of the Latvian economic stabilization program that has been worked out in cooperation with international financial institutions that might provide loans to Latvia.