The tax system has a profound impact on a country’s economic growth for two reasons. Firstly, in developed countries, taxes typically amount to the equivalent of one-third to even half of the GDP. Such a high level of taxation affects taxpayers’ economic activity. Secondly, for the state to collect taxes, it must maintain appropriate regulations defining the tax base and rates.
In the latest edition of the International Tax Competitiveness Index, Poland was placed 36th out of 37th OECD countries. In the international ranking of tax systems’ competitiveness prepared by the American Tax Foundation, only Italy scored worse.
Lithuania’s new coalition government comprised of the conservative Homeland Union-Christian Democrats, the Freedom Party, and the Lithuanian Liberal Movement has put this reform option back on Lithuania’s agenda.
The wording of the drafted law does not provide sufficient guarantees for the exclusive application of the reduced rate for the declared taxable product supplies only. The proposal was made without an in-depth analysis by the National Revenue Agency.
The competitiveness of a country’s tax system is instrumental in creating a favorable environment for foreign direct investment, stimulating business, and advancing societal well-being. Competition based on endogenous factors should not be perceived as unjust or unnatural.
The current legal system governing the interface between business and state administration is far too complicated, and interpretation of the law often depends on individual decisions of the tax authorities and courts. In order to function in this thicket of regulations, highly paid advisors are needed.
Lithuania has long been praised for its rankings in the categories of starting a business, registering property, and enforcing contracts, but it has also been criticized for a heavy administrative burden and red tape pervading the areas of dealing with construction permits, getting electricity, and paying taxes.
On June 13, 2015, the Slovenes celebrated the Tax Freedom Day – a day the Slovenes stopped working for the government and actually started earning icome for themselves. The “holiday“ illustrates how much taxes do the Slovenes pay each year.
For years, liberals have been struggling to lower and simplify Polish taxes. The results are, however, rather “moderate”, labour cost remains high, the dream of PIT flat tax – once a flagship project of the Civic Platform – is rarely even mentioned, and the recent governmental “temporarily” raised VAT rate to 23% seems to be becoming permanent. Every year, taxes and charges to the benefit of the state, not visible at first glance, are raised.
