Abstract
Until recently a common practice to combat undeclared employment in Latvia was to provide wide inspections in risk economic sections. New knowledge about the motivation of undeclared employment motivation has raised considerable concerns about the quality of the existing practices. The goal of this study is to investigate the prevalence and motivation of the undeclared employment in Latvia in order to accept/confirm or to deny/reject these concerns. This paper delivers the results of qualitative analysis of the survey that authors undertook. The results show that the current definition of undeclared employment in Latvia cannot be considered as fully supported by society, because the perception of the need to declare employment differs significantly depending on the employment regularity and the relationship with the employer. The authors found that the results obtained in the study on the prevalence of undeclared income do not differ significantly from the results obtained in the previous study of Putnins and Sauka (2018) with the leading “hard math” motivation.
Highlights
Undeclared employment is a major problem in Latvia: the activity report of the State Labor Inspectorate of Latvia (2019) showed that 42% out of 2849 inspections performed in 2018 were “successful”
The authors primarily analyzed what is socially understandable with undeclared employment, stating the question: "Do you agree that undeclared employment, which is employment without an employment contract or with an employment contract, but with partially unpaid taxes, exists in Latvia?" The majority (96% of respondents) agreed with this statement. 12% of respondents added that even they agree with the statement, they did not agree with the given definition of undeclared employment
To compare the difference in social perception of undeclared employment depending on taxpayer status and regularity of employment, the second question was asked: "In which case(s) you or your employers must register the employment in the State Revenue Service?"
Summary
Undeclared employment is a major problem in Latvia: the activity report of the State Labor Inspectorate of Latvia (2019) showed that 42% out of 2849 inspections performed in 2018 were “successful”. There was/is another quantitative analysis of the prevalence of undeclared employment (Putnins & Sauka, 2018), but the data about the motivation and classification of undeclared employment in Latvia are limited. Analyze the understanding of the concept of undeclared employment by Latvians and their tolerance to this social phenomenon; (2) to investigate main drivers of undeclared employment in Latvia. The study was conducted in the form of a survey, with data being gathered from a focus group. The results obtained were analyzed using grouping, graphical interpretation and statistical analysis methods and further discussed on the 61st Riga Technical university’s Student Scientific and Technical Conference, which took place on 20 Apr 2020 and where the representatives of the Latvian Association of Tax Consultants and of the State Revenue Service (SRS) participated
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