Currently, no regulatory act requires the employer to indicate in declarations or statements whether the salary is paid in cash or in kind.
Thus, SRS cannot obtain accurate information about specific employers who pay wages in cash, stated the Ministry of Welfare (MOW). Also, there is no information about the employees who receive their salary in cash and the amount of their salary.
The amendments have been prepared by fulfilling the measures included in the Shadow Economy Limitation Plan for 2024-2027.
The ministry is concerned that cash is often used as a tool for shadow economy activities. The greater the circulation of cash in the economy as a whole, the easier it is to hide the manifestations of the shadow economy in the circulation of legal cash. As the proportion of cashless circulation increases and the transparency of cash flows increases, monitoring procedures can be more automated, reducing the administrative burden on taxpayers, said LM.
In 2023, the component of undeclared wages or “envelope wages” made up 48.2%, which is 1.5 percentage points more than in 2022, according to the study “Shadow Economy Index in the Baltic States 2009-2023”.
According to the submitted employer reports, in August 2023, 76.9% or 63,463 employers employ up to five employees. 55% of employers have found significant risks of “envelope wages”, LM noted.
The relevant amendments have been made to the Regulations on registration of mandatory state social insurance contributors and reports on mandatory state social insurance contributions and personal income tax.