In the LB paper released last week, it is claimed that in order to achieve a fairer tax system that is more conducive to economic growth, appropriate measures have been chosen in most cases.
The conclusion of the LB indicates that the set of proposed tax changes would increase vertical and horizontal equity in the taxation of income received by Lithuanian residents – the difference between the average effective rates paid by persons working under an employment contract and the self-employed, according to the LB, will decline by around 16%. points (in 2023) to 8 percent. points (2026).
Moreover, according to the LB’s assessment, the proposed tax changes will not have a significant impact on the international competitiveness of the Lithuanian economy.
The LB notes that the tax changes will give a positive impetus to the growth of the Lithuanian economy in the short to medium term, but that a limited impetus is expected in order to achieve a ratio of public sector budget income to GDP closer to that of the European Union (EU), which is 35.8 in Lithuania and 46.4 in the EU.
Finally, the LB asserts that these proposals will give a short-term boost to economic activity, but will not have a significant impact on the sustainable growth of the economy’s potential. Although the proposed tax changes are a step in the right direction, they will have little impact on potential economic growth due to the likely limited push towards a government budget-to-GDP ratio closer to the US average. EU by improving the balance between taxes that are less sensitive to the economic cycle and more favorable to growth potential and taxes on labor and capital.
At the end of June, representatives of the opposition factions of the Seimas requested expertise on the legal regulation of the tax reform.
As Agnė Širinskienė, the dean of the mixed Seimas group, told Eltai at the time, the letter to the Parliament’s Budget and Finance Committee (BFK) was signed by representatives of all minority factions – in total, 47 politicians supported the initiative.
The parliamentarians asked to assess the impact of the proposed tax changes on small and medium-sized enterprises, the middle class and Lithuania’s competitiveness in the world. The objective was also to answer the question of whether the current tax reform would not encourage citizens to abandon their individual activities, to relocate their businesses to neighboring countries or to tax evasion. In addition, the question was raised as to how the proposed regulations would respond to regional development and foreign investment.
Source: The Delfi