Today the most urgent topics for the majority of people in Lithuania are the government’s constant proposals to introduce new taxes or to raise the existing ones, and the persistent problems of the shadow economy and unemployment. That’s why we dedicated most of our attention to these particular issues in April. The reasons behind the shadow economy and unemployment are overly high taxes and regulations, so it is necessary to lower them rather than introduce new restrictions and fines. Instead of introducing progressive taxation and the real estate tax, the government must simplify the accounting and administration of taxes on income from labour. We see a danger in introducing the voluntary common consolidated corporate tax base (CCCTB).
Sometimes when politicians and bureaucrats try to solve a problem, they create the new ones - this is illustrated by their proposals regarding the marking of food products, maintenance of buildings and regulations for companies that provide heating and hot water – we have submitted our comments regarding these initiatives and advised the authorities not to approve them.
We closely monitor and present our opinion regarding the guidelines for the reform of the social security system (Sodra) – if only cosmetic changes are adopted, we will face higher taxes and lower pensions in the future.
More information on our activities in April can be found below.
With warmest wishes,
Rūta Vainienė
LFMI‘s President
TAXATION AND BUDGET
29-04-2011
The European Commission is running a consultation regarding taxation problems, when dividends are distributed across different countries. We have submitted our answers to the Commission, proposing to tax dividends only in the country where the income is earned.
The real estate tax is based on emotions
19-04-2011
LFMI's President R. Vainienė read a commentary on the Lithuanian Radio regarding the arguments for the real estate tax. There are no logical arguments to support the tax, there are only emotional arguments, and they are not a good basis for the tax.
18-04-2011
The European Commission is running a consultation regarding the initiative to introduce a new tax for the financial sector. In our opinion, the tax is not grounded, it would reduce the EU’s competitiveness in the financial sector, would promote the outflow of capital to other regions and would not reduce excessive risk taking. The most appropriate way to solve the problem of excessively risky behaviour is to end the support from the taxpayers’ pockets, so the responsibility for risky behaviour would fall on the shoulders of the financial institutions.
LFMI is against progressive taxation
01-04-2011
For the last few years we have been repeatedly showing the vices and negative effects of the progressive taxation, repeating them again in our analysis regarding the amendments to the Law of Personal Income Tax in which we proposed to not approve this project. LFMI Policy Analyst K. Leontjeva published a commentary on progressive taxation in the daily Lietuvos žinios “Envy + Pride = progressive taxation.”
The introduction of voluntary common consolidated corporate tax base would
increase the risk of it becoming mandatory, and would not help to achieve the set goals
18-04-2011
Even though the current EC proposal to apply the common consolidated corporate tax base (CCCTB) voluntarily might look appealing to business, however, the creation of this system would be a first step towards the mandatory application of CCCTB to all firms. The tax base described in the proposal would increase the existing tax base in Lithuania, thus if CCCTB would become mandatory it is possible that the tax burden for Lithuanian firms would increase. Lithuania would lose the possibility to use a more transparent and simple corporate tax base as competitive advantage.
The use of EU funds in Lithuania – the important thing is “how” not only “how much”
12-04-2011
We carried out a review of the use of EU structural funds in Lithuania and we concluded that even though Lithuania is one of the countries that absorb EU funds at the quickest pace, the set schedule is still not kept. It is necessary to think right now about the redistribution of EU funds in order to not only absorb them in time, but to get the maximum effect.
We suggest to simplify the accounting and administration of taxes on income from labour
07-04-2011
As the Parliament is getting ready to consider the guidelines for the reform of social insurance and pension system, among which is the aim to improve the administration of social security (Sodra), LFMI proposes to simplify the accounting and administration of taxes on income from labour (paying and declaring of the tax) by making the bases of income taxes uniform. LFMI suggests doing that together with the government’s plan to give the administration of social insurance payments to the State Tax Inspectorate.
ECONOMIC REFORMS
It is necessary to gradually leave the system of state social insurance pensions and
to move towards accumulation for pensions
13-04-2011
We propose to leave the system of state social insurance pensions and to step by step move towards the accumulation for pensions. Individuals who would fail to accumulate funds would receive state support after carrying out the means test. We also gave comments and suggestions regarding the different parts of the Project regarding the financing of the State Social Insurance Fund and the improvement of its administration and regarding the improvement of the system of pension accumulation.
We presented our position on April 28 at the Liberals Movement fraction’s meeting regarding the pensions reform.
BUSINESS DEREGULATION
Regulative burden
The question regarding the sanctions for executives must be reconsidered
19-04-2011
We have repeatedly warned the members of the Parliament regarding the new provisions in the Law of Competition that lay down personal responsibility for executives of firms who break this law. The prohibition to work in executive position for 3-5 years is too severe a punishment for a person who violated the law.
Control “Additives Free”: good enforcement of the law instead of new requirements
08-04-2011
We propose to remove the requirement that all food products that display information by the producer that the product is “Additives free” or similar on the package must have laboratory tests that confirm this information. If in a specific case the said marking is misleading, and has the appearance of false advertising, the responsible institution should perform an investigation according to established order on every specific case regarding breaches of advertising regulations.
The daily Lietuvos žinios has published LFMI President R. Vainienė’s commentary on this topic, “How the control of “Additives Free” should look like.”
Shadow economy: the causes are clear yet the fight is unsuccessful
11-04-2011
What causes the shadow and how to fight it? Are the measures that the government is proposing, such as cash registers and restrictions on the use of cash a good way to fight it? What is the scope of the shadow economy in other European countries? What can we judge from the first two months of the year about the success of government‘s plan to draw one billion litas from the shadow economy? LFMI‘s Policy Analyst Vytautas Žukauskas has published an article on these topics in the weekly Veidas.
In addition to that, on April 20 we participated in the hearings „The effectiveness of the Governmental measures to fight the shadow economy during the first quarter of the year 2011, and their possible impact on the income for the budget”.
Why the shadowy Albinas will not go to the bank?
05-04-2011
LFMI president R. Vainienė read a commentary on the Lithuanian Radio regarding the new ways the government is trying to fight the shadow economy. This time the government has decided to restrict the use of cash. Is that an appropriate measure? Or maybe the shadow is simply laughing at a fight like this?
Employment regulation
What measures would help to further a decrease in unemployment and encourage
the creation of new jobs?
29-04-2011
Replying to the government‘s consultation we propose to not fake a fight against unemployment, but to take urgent steps – to improve the business environment, to create the preconditions for growth of the economy, to reduce the negative view of the entrepreneurship, and the mentality that is hostile to business, to lighten the procedures of forming and discontinuing a work agreement, to discard the protection of special groups, to increase the flexibility of regulation regarding the negotiation of the working time and to create more possibilities to negotiate the working time individually or at the company level, to reduce the unemployment benefits and other guarantees that are extended to the registered unemployed, to reduce the minimum wage. All of these measures are not „anti-crisis“ and are not aimed at only fighting the consequences of the existing unemployment or to temporary ease the situation in the labour market. The aim of all those measures is not only a reduction of unemployment, but also a sustainable long-term economic growth.
Transport
It is necessary to continue and not to halt the reform of the railway sector
19-04-2011
The Parliament proposes to remove the Law on the Railway Sector Reform from its agenda and so essentially change the direction of the railway sector, on which the agreement was reached in 2004, when the Law of Railway Sector Reform was passed. The draft law contains no strong arguments to prove the necessity to eliminate the above mentioned Law of Railway Reform. We propose to not approve the bill. Energy policy
The electricity market lacks competition and freedom of choice
29-04-2011
As the new version of a draft of the law on electric energy reached the Parliament, we provided our comments and proposals regarding the issuance of permits to develop energy production capacity, the connection of new consumers to distribution network, the direct lines, and competition in the electricity sector.
Changes to the Laws on Heating Utilities and Competition will not solve the existing problems, creating the new ones instead
12-04-2011
The prohibition for maintenance companies (or persons) to have any connections with the providers of heating or the companies that produce the equipment of heating or service the equipment will be very hard to implement in smaller cities. The new regulation may reduce the efficiency and raise the costs of maintenance services.
The changes to the Law on Competition will not improve the supervisory mechanism and will increase the administrative burden for companies, meanwhile the definition of dominant position in the draft is discriminatory towards the companies that service building's heating and hot water system and towards the subjects, who administer the objects of common usage.
LFMI‘S PARTICIPATION IN THE SUNSET COMMISSION
LFMI‘s President Rūta Vainienė continued her active participation in Sunset Commission to reduce bureaucracy.
ECONOMIC EDUCATION
29-04-2011
LFMI BLOG
Vytautas Žukauskas: Whose income would be increased by progressive taxation?
29-04-2011
Kaetana Leontjeva. The Royal wedding - through the social glasses
29-04-2011
Vytautas Žukauskas: The fight with the shadow in a scheme
20-04-2011
