Additional declarations in millions – what have VID letters revealed about residents’ income?

According to letters sent by the Latvian State Revenue Service (VID) to residents with significant discrepancies between the turnover of their bank accounts and declared income, 800 people have declared an additional payable tax in the amount of EUR 2.6 million, said Director General of VID Baiba Šmite-Roķe in an interview to TV3 programme “900 seconds”.

She said VID has sent out nearly 60 000 letters in relation to various discrepancies between residents’ bank account turnover and declared income.

Šmite-Roķe also mentioned that three-quarters of the residents have responded to notification letters by both submitting income declarations and explanations.

“Approximately 800 people have declared additional payable tax worth a total of EUR 2.6 million, declaring declaring multi-million euro taxable revenue and even more – EUR 140 million – non-taxable revenue,” said Šmite-Roķe.

She stressed that VID started out sending letters with 5 500 residents whose discrepancy between bank account balance and declared income was greater than EUR 100 000. So far results have been for the letters sent out in the first weeks.

Šmite-Roķe also explained that a gift from a loved one or friend is not taxable income. However, the law provides that if the husband gives his wife EUR 10 000, the money must be declared in the annual income declaration.

“The only information we receive from banks is the amount of money that lands on the bank account. We cannot trace amounts – whether it’s the wife or some unknown legal person that pays you an envelope wage, for example,” said the head of VID.

The head of the institution also admitted that, according to VID, discrepancy between bank account turnover and declared income may appear for people who perform payments between accounts in different banks, as banks do not exchange information.

“Banks do not exchange information with each other, because it is still private information, and then VID has information about all these banks and transfers between one person’s accounts in different banks may appear in these explanations,” said Šmite-Roķe, adding that upon receiving explanations, VID performs an inspection to check if people have accounts in different banks.

The head of VID also said that the assessment of the efficacy of the sent out letters will be performed at the beginning of next year.

On the 23rd of September, VID started reaching out to residents who were found to have significant discrepancies between their officially declared inform and information about their bank account balance provided by their banks.

VID, through data analysis, selected a total of 70 000 people with significant discrepancies (more than EUR 20 000 per year) between their bank account turnover and the income reported to VID.