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The Cabinet of Ministers approved the conclusion prepared by the Ministry of Finance, which was requested by the Board of Seimas.
“We propose to support (…) the amendments to increase the NPD, since the lowest beneficiaries would be the most benefited, it would undoubtedly make a more specific contribution to reduce poverty and income inequality and, consequently, could justify and justify those additional $ 84 million, Finance Minister Vilius Šapoka said at the meeting.
However, according to him, the ministry supports the direction of reducing the tax burden related to employment, but proposes not to reduce the personal income tax.
“Reducing the rate for the entire population would not be in line with the Government’s program or the recommendations of international institutions on reducing poverty and income inequality through fiscal measures. By reducing the rate, residents with more income would feel the greatest benefits, ”said V. Šapoka.
According to him, the bill aims to encourage consumption, but it is low-income people who spend most of their additional income when recipients are more savings-oriented.
“The loss of budget revenue for half a year would amount to some 400 million. Given the reasonable risk that the period of tariff reduction could be extended, which has been the case so far in Lithuania, the losses for the whole year would amount to some 715 million euros. ”Argued V. Šapoka.
The conclusions of the Ministry of Finance establish that accepting the proposal to reduce the PIT would create a significant gap between the benefits for the low and high income population.
“For a person earning the monthly minimum wage (MMA), the benefit of reducing the GPM rate from July 1, 2020 would reach 77 euros, and for a person earning 4 thousand. EUR – 1117 EUR, is say and. almost 14.5 times more than earning MMA. This would only increase income inequality in Lithuania, and international institutions regularly emphasize the need to improve Lithuania’s tax and social benefits system to address this problem, “states the Ministry of Finance in conclusion.
According to the Ministry, only by increasing the NPD would the benefits be received by the people with the lowest incomes, and the benefits would decrease as the population’s income increases.
“After deducting taxes, the income of residents who earn MMA would increase by about 120 euros per year, and for those who earn 4 thousand. It would have no effect. Therefore, an increase in NPD would make a more specific contribution to reducing poverty and income inequality, as well as the unemployment rate, and it would be more socially fair, especially considering the situation created by the new coronavirus pandemic, “notes the Ministry of Finance.
The conclusion indicates that the loss of state and municipal budget revenues due to the reduction of the GPM rate for half a year along with the increase of the NPD to 400 euros per year would amount to about 400 million. euros
The President proposes to temporarily reduce the GPM rate for all earnings to 3 average wages from 20 to 15 percent. The head of state also proposes to increase the NPD from 350 to 400 euros this year.
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