Latvia’s shadow economy remains a significant challenge, affecting fair competition, social equity and public trust. With nearly a quarter of the country’s GDP tied to unregulated activities in 2023, the issue demands urgent attention. In a recent LV Portāls interview, Evita Goša, leader of the Shadow Economy Combatting Work Group at the Foreign Investors’ Council in Latvia (FICIL), emphasized the critical need for a cohesive approach to address this pervasive problem: “The shadow economy undermines sustainable development. Only through collective efforts can Latvia build a fair, transparent economy.”
The shadow economy distorts societal values, fostering the belief that dishonesty leads to success. It undermines sustainable development, weakens public trust and hinders investment, particularly in high-risk sectors like construction. Workers in the shadow economy also lose access to critical protections, such as pensions and healthcare, exacerbating long-term vulnerabilities.
The Shadow Economy Restriction Plan for 2024–2027 marks a significant step forward. Unlike previous fragmented efforts, it introduces universal measures, such as tackling envelope wages and increasing financial transparency. The Plan sets a measurable goal: reducing the shadow economy by 1% of GDP by 2027. FICIL advocates for empowering the Ministry of Finance with stronger authority to coordinate efforts and ensure that all institutions are aligned with the Plan’s objectives.
Addressing the shadow economy requires more than policy; it demands a societal shift. Shadow practices erode trust and promote non-compliance, making public awareness and cultural change critical to success. Practical measures, such as prioritizing cashless wage payments, can support this transformation.
As Evita highlighted, only through unified efforts across government, business, and society can Latvia create a fair and transparent economy. The new plan provides a pathway forward, but its success hinges on effective execution and shared commitment to change.
To read the full interview, please visit this site.