Lithuania ranks 6th in the 2021 International Tax Competitiveness Index presented by the US-based Tax Foundation. Estonia maintains the top ranking and the neighboring Latvia comes second, followed by New Zealand, Switzerland and Luxembourg.
Within the framework of the “Polish Deal”, PiS is raising the tax burden on income from rental housing drastically and without a transition period. In this way, the government wants to slow down the growth of property prices and, at the same time, increase budget revenues. This is a wrong direction.
Estonia, Latvia, and starting from this year Poland (partly) are taxing profits earned by companies only at the dividend payout time. Such a model promises to raise both domestic and foreign investment, and it can help the economy recover from the crisis more quickly. The opponents of this taxation system in Lithuania argue that various benefits, which alleviate the burden on business and encourage investment where it is most needed, are already in place.
The Ministry of Finance has undertaken a systematic review of tax benefits. This job will not be easy but it makes sense to look at tax benefits in difficult situations. At first glance, it might seem that there are not many tax benefits so they can be examined and sorted in one sitting. Sadly, this is not the case. There are many different benefits which are advantageous to some citizen groups but annoy the others.
In March 2020, under the pressure of a growing pandemic, we voluntarily shut down the economy for the first time to protect the lives of fellow citizens. Over the next twelve months, when the economy and the people have already been locked in a lockdown, we have managed to completely devastate the services segment, we have managed to devastate children in online education and, worst of all, we have not prevented a high number of deaths from COVID.
This year’s Tax Freedom Day fell on June 25, and this year the state will redistribute 48 percent of what we produce. Last year we announced that we would have to revise for the first time ever, but in the end it was not necessary. The economic downturn was smaller than expected, and so, too, was the redistribution eventually.
The Lithuanian Free Market Institute (LFMI) announces the celebration of Tax Freedom Day on Tuesday in Lithuania. The fact that it is celebrated almost three weeks later than last year shows increased government spending.
Lithuania ranks sixth in the Global Tax Competitiveness Index but it has the least attractive corporate tax regime in the Baltic region. It taxes retained and reinvested profits and applies a personal income tax when dividends are paid out. The effective combined tax rate stands at 27.7%. Estonia and Latvia tax only redistributed profits, at 20%.
The Slovak Minister of Finance claims a tax and contribution burden on self-employed people should be increased in order to be “fair“ in comparison to employees. Why can’t we put a sign of equality between these two statuses? Why doesn’t the term “fair“ make sense?
Some respected economists identified the issue of consolidation in public budget already in 2022 as a third-order problem. From an analytical point of view, he is, of course, right. A one-year deficit of 10% of GDP is nothing compared to a permanent two to five per cent deficit in the pension system with a declining workforce.
