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RIGA - After complaints by the public and mounting media scrutiny, Latvian Finance Minister Andris Vilks has changed his mind and ordered the State Revenue Service to attend to the problem of what is considered to be a disproportionately low tax debt reporting threshold, and one which has been causing distress among the business community, reports Nozare.lv.
But even up till early last week, Vilks maintained that he did not see it as a problem that the State Revenue Service’s database on tax debtors on April 1 included information for about 53,594 tax debtors, with registered tax debt amounts as low as just 100 lats (142 euros).
According to the Revenue Service’s data, there are about 195,702 legal entities in Latvia overall. According to Firmas.lv and Latvijas talrunis data, there are currently about 55,000 active enterprises in Latvia.
The public database held information for 4,124 individual tax debtors with tax debt amounts exceeding just 100 lats.
Unreliable information for business
The State Revenue Service’s current tax debt threshold of 100 lats is too low and needs to be raised to at least 1,000 lats, believe retailers interviewed by the Nozare.lv business portal.
Elvi food stores Commerce Director Laila Vartukapteine believes that the threshold must be raised to at least 1,000 lats; another option would be for companies to also be included on the Revenue Service’s list of tax debtors if they owe the state 100 lats or more for a longer period of time. The current system cannot be considered a reliable method for the objective evaluation of business partners, said Vartukapteine.
Aibe organization’s representative Diana Riekstina said that the 100 lats criterion was not of much use in evaluating a prospective cooperation partner’s liabilities and solvency. “Companies may run into debt not just because of temporary financial problems, but also due to technical mistakes and re-calculations. We would like the Revenue Service to offer more support and be more active in tackling bureaucratic problems and simplifying the various procedures that deal with business management, for instance, the issue of references and licenses,” said Riekstina.
Touting its effectiveness, Raimonds Jansevskis from Palink, the operator of the Iki chain stores, said the Revenue Service’s public database is a useful tool for Palink and, possibly, many other companies, as it offers a way to determine if a prospective or existing cooperation partner has tax debts.
“Now anyone can see this online. This database is an instrument for more efficient evaluation of potential business risks,” said Jansevskis.
All three organizations’ representatives said that, as far as they knew, their companies were not included on the Revenue Service’s so-called ‘black list.’
Major supermarkets caught in SRS grip
But major supermarket chains Maxima Latvija and Rimi Latvia have been included in the State Revenue Service’s database of tax debtors. According to the database, Rimi Latvia and Maxima Latvija owe the state 10,531 lats and 3,566.33 lats, respectively. Both companies, however, insist that they have no tax debts.
The State Revenue Service’s publicly available information on the tax debts of supermarket chains Rimi Latvia and Maxima Latvija is misleading; therefore, the SRS should retract it, Latvian Food Retailers’ Association executive director Noris Kruzitis said in an interview with Nozare.lv.
Kruzitis points out that the association is convinced that the SRS is responsible for its publicly available erroneous information caused by the system’s deficiencies or poorly developed IT solutions, raising unjust suspicions about these honest taxpayers.
Moreover, the fact that, out of 55,000 active companies, 53,594 or 97.4 percent were listed among tax debtors at the beginning of April raises doubts about the usefulness of the list. The situation is not only a spit in the face of these companies and their reputation, but also the entire tax system, showing the SRS as a repressive institution ruthlessly turning against tax payers, emphasizes Kruzitis.
The Latvian Food Retailers’ Association expects the SRS to come up with a public statement, explaining that its information about the debts of retailers is erroneous and was caused by the system’s deficiencies. The association also expects that the database will be put in order in accordance with the Latvian laws and regulations, ensuring successful cooperation with Latvian businesses.
Fault due to technical reasons
The Rimi Latvia chain, which has regularly appeared on the State Revenue Service’s ‘white list’ of companies, has been included on the list of tax debtors only because of a delayed payment in the banking system, expressed Rimi Latvia representative Laura Podskocija. Rimi Latvia has received an explanation from the State Revenue Service, which said that its database is updated twice a month, on the 7th and 26th, and verified by the end of the 6th and 25th of each month.
The company has been listed among the tax debtors because a payment was not received by the 7th, even though it was made on the 5th, explained Podskocija.
Rimi Latvia says it is unpleasantly surprised at such a turnabout, pointing out that a possible error in the Revenue Service’s system has led to the company’s being blacklisted, damaging its image.