Lithuania

‘To serve or to rule?’ – this is a dilemma we face as we reflect on the fundamental principles of “the scope of powers [of the state] shall be limited by the Constitution” and “state institutions shall serve the people” on the occasion of the Constitution Day.

Governments have responded to the pandemic by printing money, thus disrupting the usual economic relationships. Financial capital, which was long been regarded as a most-demanded resource, has lost its position to raw materials which in turn have lost to labor force.

The Lithuanian government seems to have a clear vision and arguments about how we should move towards the green economy. More importantly, everyone is invested in making an actual change happen. Increased public awareness is already impacting our habits and behaviors.

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.

Low quality of law-making has so far been the result of disregard of law-making standards and requirements rather than a lack of them. A recent study from the LFMI shows that almost one in two pieces of legislation is passed without impact assessment.

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.

Today, the most worrisome problem is the pandemic and its management. The second problem is the effects of the pandemic on the economy and people. Other issues that seemed fundamental until recently, have been moved to the bottom of the agenda. But they did not disappear. One of those problems is population ageing. It continues, as it did before the pandemic, in Lithuania and all the Western world.

The OECD claims that financial literacy is a significant skill in participating in modern society. Pupils should be improving their financial knowledge as early as possible to become active agents of their abilities to plan simple finances. Kids should learn how to plan their spendings and savings and how to build responsible financial behavior.

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.