RIGA, June 10 (Xinhua) -- The proportion of Latvia's shadow economy did not change much in 2019 and was 23.9 percent of the gross domestic product (GDP), according to the latest Shadow Economy Index released on Wednesday by the Stockholm School of Economics in Riga (SSE Riga).
Compared with 2018, when unreported economic activity in Latvia accounted for 24.2 percent of GDP, the reduction of the shadow economy in 2019 has been negligible, especially considering the steady economic growth recorded during that time, Arnos Saula, a SSE Riga professor and author of the study, said on public radio.
Janis Endzins, chairman of the Latvian Chamber of Commerce and Industry, said that the authorities should be focusing not only on punitive measures but also on motivating people to pay their taxes.
Professor Sauka pointed out that during the financial crisis of 2009 and 2010 Latvia had a huge shadow economy, accounting for 36 to 38 percent of GDP. In the following years it shrank but this process gradually slowed down, and in 2019 the proportion of the shadow economy reduced by a mere 0.3 percentage point.
Undeclared wages accounted for the largest portion of the shadow economy, or 44.1 percent, with working people in Latvia receiving an average of 22.3 percent of their income "under the table", the study showed. Moreover, the proportion of unreported pay even increased by 0.8 percent in 2019.
Among the sectors of the Latvian economy, construction showed the highest unreported business activity in 2019.
Sauka warned that the current economic crisis, brought about by the COVID-19 pandemic, is likely to cause the shadow economy to expand for the next couple of years. Enditem