Are you saying the Lithuanian economy is doing better than Latvia?
At least I suppose so; the fact is that Lithuanians have a lot of business in Latvia - food and construction markets, building and servicing companies, etc. At the time Latvians do not have a lot of businesses open in the Baltic states at all. Yes, I also suppose the best economics is in Estonia now.
Latvian taxes are quite low aren't they?
25% top income tax, is what I read, which is low compared to Italy, France, Germany, Norway, Sweden etc.
The biggest problem here is that you count the part which any employee must pay. Imagine that you want to get 1,000 EUR salary on hands; employee actually should reserve for you 1,250 EUR. Besides of it, there is social tax which is split between an employer and employee, and a few other taxes which company should pay. Roughly speaking, if you want 1,000 EUR on hand, employee should reserve about 1,500 for you. This is actually big money for Latvian business.
Also, let's not forget about other taxes Latvia has... 21% of a value added tax for ANY products in ANY shops (no discounts for milk, bread etc. - whatever you buy, you always pay 21% extra to any sum). Car owner's taxes are boosted 5-6 times in about 5 years; and they will continue to grow. This year, there was introduced a "free" electricity market, which actually boosted up electricity fees for about 19-20 eurocents per kWh - I suppose, this is one of the biggest electricity fees in Europe; now imagine how many companies are tied up with electricity - EVERYONE. Now add dying and leaving people, and count on about 250,000 bureaucrats in Latvia, they all need their salaries paid for almost nothing - this all could briefly explain where the worker's money goes.
Does anyone here run a business in Latvia?
It's a dangerous thing
I know some of my friends closed their small companies this year, it became unprofitable exactly because of high taxes growing each year and non-predictable tax politics, which doesn't provide anything stable.
This year's government's proposal was also an obligate "social tax" - even if you don't have enough of income, they proposed that everyone should pay about 100 EUR per month as a social insurance. I'm not sure if such thing will be introduced, but this definitely will let people hide their income.