Criticism of the proposal to abandon life insurance benefits and contributions to pension funds: there was some kind of error

The president of the Lithuanian Association of Investment and Pension Funds (LIPFA), Tadas Gudaitis, says that the reform project opposes two ways of saving: an investment account, long-term life insurance and third-tier pension fund. He testified that LIPFA does not support such a decision.

“What we see in the tax reform: in Lithuania we want to contrast two ways of saving, accumulating and investing, and we say that we are creating an investment account, thus catching up with Latvia and Estonia, but at the same time, are proposing to us to abandon relief focused on long-term accumulation. We do not support this”, T. Gudaitis said during the hearings of the Budget and Finance Committee of the Seimas .

He was also backed by economist Marius Dubnikovas, who called the decision to ‘contrary’ the investment account with the relief of contributions to third-tier pension funds and life insurance a mistake. long term.

“There were errors as far as the investment account was compared to the third tier and life insurance benefits. An investment account is an instrument that primarily deals with accounting matters. (…) This is to be welcomed, it should be a fairer and simpler tool for calculating taxes,” Dubnikovas said.

“In Lithuania, savings rates are low. (…) Savings is a very important form. The third level and life insurance currently serve about 400,000 people. people who use this benefit and this are mostly people who don’t have a significant income,” he said.

The decision to deny third level pension and long-term life insurance benefits was also criticized by Lithuanian Free Market Institute (LLRI) expert Reda Simonaitytė, who pointed out that the demographic situation in Lithuania does not improve.

“We often repeat that the provision of the GPM law, which allows the deduction of expenses related to contributions to third-tier pension funds and investment life insurance, should not be considered a tax advantage. It rather, it is a tax system that implements the principle of subsidiarity, in which the responsibility for providing for the needs of old age is shared between the state and the person himself”, affirmed R. Simonaitytė.

“This is especially important when the demographic situation in our country is not improving,” she said.

Nevertheless, Finance Minister Gintarė Skaistė pointed out that this is an incomprehensible measure for almost half of investment life insurance buyers, and that the application of the reduction is an advantage instrumental that brokers use when selling.

“Almost half of investment life insurance buyers don’t really understand what this product is and often buy it, even though it’s generally not suitable for people. When selling, brokers emphasize the haircut and, in our view, such application of the haircut gives an instrumental advantage to the instruments subject to the haircut, whereas other investment and savings instruments do not have such instruments,” said G. Skaistė.

As part of the tax reform bill, the government is seeking to abandon the benefits of long-term life insurance and contributions to third-pillar pension funds and to simplify the tax regime applied to investment income by introducing a new instrument: an investment account.

ELTA recalls that the package of revision of the tax system, which caused many debates, was approved by the Seimas at the end of June after its presentation.

Critics of the reform were voiced in a joint statement by 54 trade and professional associations. Economic structures that prepared the appeal to factions and Seimas committees urged parliament to reject proposals to raise personal income tax, arguing that raising taxes would worsen the business environment of the country, would harm Lithuania’s competitiveness and encourage the underground economy.

According to Finance Minister Gintare Skaistė, 800,000 people would benefit from the reform, thanks to the increase in the amount of non-taxable income. population or 70 percent of all workers in the country, whose income amounts to an average wage. At that time, the tax burden, after changing the personal income tax model, would increase by about 17,500 people. individuals working individually.

The tax reform presented by the government provides for higher taxes for some of the self-employed. Once the amendments are passed, more people would have to pay property taxes, the procedure for applying for certain benefits would be changed and a minimum unemployment benefit would be introduced.

Source: The Delfi





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