In pursuit of its educational activities, LFMI has announced a writing contest "Freedom Studies," aimed at enhancing the understanding of social and economic laws in the life of the society.

 

Drawing on the experience of the previous two contests, LFMI invites studying people to get acquainted more closely with the works of free-market philosophers. In 2006 the LFMI’s contest marks the 125^th birth anniversary of Ludwig von Mises who is among the world’s most prominent economists of the 20^th century. Contestants are asked to analyse Mises’ works - Liberty and Property, Capitalism, Socialism, Interventionism, Inflation, Foreign Investment, Politics and Ideas, and Bureaucracy - and to write an essay which would be based on, or debate/develop/apply, the ideas reflected in one or several of these writings. All of these works by Mises have been published in Lithuanian and are posted on LFMI’s website. 

 

The contest is designed for university students and self-studying people who are above 17 years of age and do not hold a PhD. LFMI believes that by writing this essay, students will be encouraged to analyse how economic and social laws function in the society, to understand peoples’ motives in social-economic activities, and to perceive that the variety of people’s aims and values does not disturb but, to the contrary, maintains a smooth coexistence of the society.

 

The winners of the contest will be announced in September 2006 and will be awarded by cash prizes. The best papers will be posted on LFMI’s website in Lithuanian. LFMI hopes that this contest will develop a tradition of teaching freedom as a subject that requires profound public understanding.

 

 

On 28 February 2006 LFMI staged a press conference and a round table discussion “It’s Time to Speed Up the Tax Reform in Lithuania” and presented a package of policy proposals on urgent changes in the Lithuanian tax system. The Institute’s recommendations have been designed with a view to reducing emigration of the labour force, increasing Lithuania’s competitiveness and enhancing people’s welfare.

 

LFMI’s proposals embrace a number of taxes applied in Lithuania. According to LFMI, it is indispensable to cut the personal income tax without delay (from the current 33-percent tax rate to 24 percent starting from 2007 and to 15 percent from the beginning of 2009), to set an upper ceiling on state social insurance contributions (of 3.5 average wage) and to gradually increase the component of the social insurance contribution allowed to be transferred to private pension funds, and to abolish the newly imposed real estate tax for residents applied to real estate used for commercial purposes, the new social tax for companies and all exemptions of the value added tax.

 

Although participants expressed various views regarding the specific details of the tax reform, the majority agreed that the personal income tax needs to be lowered considerably and urgently and that the ceiling on social insurance contributions needs to be established before long. There was also unanimous agreement among the discussants that tax exemptions distort the market and complicate tax administration.

 

LFMI hopes that the proposed package of tax policy solutions will serve as the first practical step towards shaping a plan for a real and tangible tax reform in Lithuania.

 

 

Seeking to promote competition in the EU energy policy, in March 2006 the Lithuanian Free Market Institute (LFMI) joined a group of European think-tanks and signed a petition on EU energy policy initiated by the Instituto Bruno Leoni (Torino, Italy), in cooperation with other two organisations Instituto Juan De Mariana (Madrid, Spain) and Liberalni Institut (Prague, Czech Republic). The petition was signed by around 90 individuals and organisations and submitted to the European Commission and national governments.

 

The petition came as a reaction to the French government’s decision to sanction the merger of Gaz de France and Suez to prevent the bid of the Italian company Enel, as well as the opposition of the Spanish government to the acquisition of Endesa by the German group E.On, which are not unusual episodes.

 

The petition says that despite the weakness of the European Union’s energy policy, member states are trying to lock domestic markets, with the goal of shielding companies they control or that they are otherwise linked to. “Not only is this practice shattering the dream of an economically integrated Europe, it is also very likely it will have an awfully adverse impact on the consumers,”- believe the signatories.

 

According to the petition, opinion leaders, decision-makers and the public at large ought to be aware of the near-sightedness of the current policies, which threaten the competitiveness of European companies and the stability of the economy for the sake of a potential short-term advantage.

 

The organisations urge the European Commission and national governments to commit to the following concrete measures: to remove the barriers to the consolidation of European companies, by abstaining from hindering any acquisition of national companies by foreign enterprises; to sell majority stakes of energy companies, where they are government-owned; and to open all domestic markets in order to promote the development of a genuine European internal market.

 

“Only these measures will render Europe able to deploy on the global markets strong actors able to compete, to innovate and to succeed,”- believe the signatories.

 

The full text of the petition can be found at: http://www.brunoleoni.com/nextpage.aspx?codice=0000001245.

 

 

Pursuing activities in one its strategic areas – the tax policy, LFMI has analysed the currently debated new bill of the Law on Copyright and Neighbouring Rights and submitted comments on the proposed new copyright levy. It is a tax collected from taxing various medium which can be used for reproducing copyright products and audiovisual equipment with a reproduction function (audio and visual players, film cameras, telephones, copying machines, faxes, etc.). Tax revenues are then distributed among the authors who are harmed through copying of their works.

 

LFMI concluded that the proposed mechanism of copyright levy will not protect the authors’ rights from violation and it will not even deter from violating these rights, which is the specific requirement for this tax set in EU laws. According to LFMI, such method of taxation would serve as legalization of piracy when it becomes legal to reproduce works because the right to do so has already been paid (by taxing equipment), and, vice versa, all privately imposed measures against piracy would become legally questionable.

 

The mechanism of copyright levy proposed in the draft law is disproportionate as it is impossible to calculate precisely who suffers what precise loss, while the harm done is only hypothetical. In addition to that, the proposed tax imposed on products brought into the territory of Lithuania is tantamount to import duties, the measure prohibited in the common market of the EU.

 

LFMI pointed out that the Directive 2004/48/EB does not require adopting such type of taxation which is put forth in the mentioned draft law. According to EU law, member states themselves choose the way of taxation in case it is in general needed.

 

LFMI thinks that the alternative to a copyright levy could be the right retained for authors to judge themselves whether to permit or prohibit reproduction of their works. No restrictions should be imposed when authors permit copying of their works, while the law should seriously take into account when authors prohibit reproduction. To protect works from copying, authors should be allowed to apply technical measures intended for their protection. 

 

As it is likely that consumers would disregard the authors’ prohibition and circumvent the technical means employed, the law should envisage that a single copy of an author’s work, which is prohibited to be reproduced, made for non-commercial purposes is not harmful and should not be penalized.

 

 

A representative sociological survey conducted by the Lithuanian Free Market Institute (LFMI) and the company RAIT demonstrates that the majority of employed people in Lithuania do not prioritise laws regulating employment and would not object if employment regulation was not as rigid as it is at present.

 

The survey was aimed at eliciting how employees evaluated relations between employers and employees, the working time, salaries and other issues of labour, as well as various violations of labour laws.

 

As the survey results show, the majority of working individuals in Lithuania do not think that employment relations should be characterised as hostile. In other words, employees do not think that labour laws are intended to protect them as a weaker party of employment relations (68.1 percent of respondents).

 

Nearly half of those polled believe that the source of improvement of their working conditions is development and a better financial situation of companies they work in, rather than government, a stricter regulation or control.

 

The poll also uncovered that every third employee, both in private and public sector, works overtime which is not paid respectively. Four out of five working individuals would agree to work overtime and receive extra remuneration for such work. LFMI believes that people are sending a clear signal that they do work overtime despite official prohibition. Thus it is necessary to amend the Lithuanian Labour Code and allow working overtime officially – only under such circumstances workers would have opportunities to work extra time legally and to demand official payment for overtime work.

 

More than half of respondents (59.6 percent) think that regulation of the working time is not very important because the length of their work usually depends on mutual agreement with an employer, notwithstanding that the Labour Code either fixes a certain working time or delegates it to be regulated by collective contracts. This leads to the conclusion that workers do not give much prominence to the power of labour laws, collective or formally concluded labour contracts.

 

Respondents were also asked to evaluate the activities of trade unions in Lithuania. The results show that only 14.9 percent of working individuals are satisfied with trade unions’ representation of their interests. As much as 56.2 percent respondents reported to have negative views regarding trade unions’ work: 33.1 percent said trade unions were detached from workers, 13 percent believe trade unions mind the interests of their leaders, and 10.1 percent thought that trade unions were incapable to represent the variety of interests of private individuals.

 

LFMI is of the opinion that such adverse attitudes towards the activity of trade unions should alarm trade unions in the first place and also the government which has vested wide powers to trade unions to represent the interests of all employees in the country (e.g. in the Tripartite Council). Taking into account that workers evaluate the activity of trade unions rather unfavourably, the first thing to do for decision makers is to eliminate the wide powers granted to trade unions to conclude collective contracts on behalf of all workers (even those who are not members of trade unions).

 

This opinion poll was carried out in 24 November - 3 December 2005 and 1,093 Lithuanian residents of 16 to 74 years of age were polled.

 

On 14 February 2006, the Lithuanian Free Market Institute released a petition on the excise tax policy in the European Union signed by sixteen European free-market think tanks. The Petition was submitted to the European Commission, the European Parliament and the Council of Europe as well as national governments of the member states.

 

The Petition has been prepared in view of adverse effects of high excise taxes on the consumers in the new member states, the ongoing discussions on increases in excise duties and further steps taken towards tax harmonisation. A group of European free-market think tanks have undersigned the petition highlighting the negative effects of EU’s excise tax policy and encouraging national governments and EU institutions to consider these implications and to commence discussions on changes in the excise policy.

 

According to the petition, failures of partial excise harmonisation have revealed inherent flaws of tax harmonisation: societies are prevented from having lower taxes and smaller and more efficient governments; member states have limited opportunities to adapt to their unique social, economic and geographic conditions; and national governments are shielded from potential competition amongst them.

 

Excise duties constitute up to 80 percent of the price paid by consumers, thus heavily distorting market information about the supply and demand as well as long-term prospects and needs to adapt to changes in the market. The abolition of the minimum level of excise duties and the reduction of excise tariffs are long-term measures in order to help the consumer to adapt to the changes in the market. 

 

The petition says that harmonization of excise duties fails to attain its objectives: differences in prices across EU member states remain considerable, collision of wine-producing countries and the remaining member states demonstrates the narrowness of the goals set for the excise policy, and different tariffs of excise duties among member states are tolerated by the EU itself as they do not distort the competition and the internal market. Minimum levels of excise duties were revised before the last EU enlargement took place; these levels were designed to meet the living and income standards in the EU-15 and proved to be too burdensome for Central and Eastern European countries.

 

“We believe that it is internal competition and the four freedoms, not uniform taxes, that create the common market,”- the European think tanks reported and urged EU and national authorities to launch an EU-wide debate on the reform of the excise tax policy and considering an abolition of the minimum level of the excise duties.