Latvian gov't considers caps on cash transactions to fight shadow economy

Latvia is considering imposing restrictions on cash transactions and paying wages in cash next year as part of the government's efforts to clamp down on shadow economy, business daily Dienas Bizness reported on Wednesday.

Citing Latvian Finance Minister Dana Reizniece-Ozola, the report says that the government has already showed support to the proposal to limit the amount of cash transactions to 20 minimum monthly wages. Given that the minimum monthly wage will be raised to 380 euros(423.33 U.S. dollars) next year, the maximum amount of a private cash transaction allowed in Latvia would be 7,600 euros.

The proposed caps on private cash transactions are expected to provide 100,000 euros worth of additional budget revenue in 2017 and about as much in the next two years, according to the business daily.

Under the proposed regulation, individuals who are not involved in commercial activity would be banned from exceeding the above threshold for cash transactions, regardless of whether the payment is made in a single or several installments.

The only exception could be made for deals that are sealed in a notary's presence, with the notary then expected to report the transaction to the tax authority.

Cash transactions are considered to involve the highest fraud, money laundering and tax avoidance risks, as it is virtually impossible for supervisory authorities to check the details of such deals. Endit