The tax review may be more extensive than has been said so far: privileges are coming to an end

Tax expert Kęstutis Lisauskas appreciates the rulers’ plans to solve long-standing problems.

“The main question is whether the backbone and the political will will be enough, because all the well-to-do interest groups will yell, threaten, intimidate and exert all political influence. Let’s see how it will be here,” he warned.

Profit analysis

Government Program 18 provides for a cost-benefit analysis of tax incentives. Finance Minister Gintarė Skaistė said she would do it together with the State Tax Inspectorate.

“Look at all the benefits, see how appropriate they are today. Perhaps the objectives of those benefits can be achieved by other means, such as specific benefits,” he said last week after meeting with President Gitanas Nausėda.

G. Skaistė pointed out that the working group of experts on this subject will begin its work in February and the plan prepared by them will be presented in March or April. “We hope to adopt the amendments in the spring session of the Seimas so that we have a 6-month deadline and companies can adapt,” he said.

As Simon Krėpšta, the president’s senior adviser, explained, the changes point to greater tax fairness.

“We have a series of tax benefits, it is necessary to review what benefits, what not, but they generate injustice. “Another issue is the ‘cattle farm’, where different rates are applied not depending on the amount of income earned, but on the way it is received,” he said.

“Animal husbandry” is a metaphor for the wrong tax system coined by economist Raimondas Kuodis, referring to a book by British writer George Orwell of the same name.

VSD go PSD

The government program also addresses developments in the areas of state social insurance (VSD) and compulsory medical insurance (PSD). As you know, individuals pay taxes on personal income tax (20%), SSD (12.52%) and PSD (6.98%) salaries.

“We will abandon socially unjustifiable benefits and different taxation for the same activities, we will reduce opportunities to avoid paying social security contributions,” the document reads.

According to Delfi Tomas Kavaliauskas, advisor to the Minister of Social Security and Labor, the concrete measures will be specified in the Government’s action plan.

“With regards to benefits, we would see an opportunity to review the benefits and social services system to ensure the accuracy of benefits and services, ensuring only socially justified benefits.

The objective will be to stop the avoidance of SSD contributions by improving the administration of contributions, implementing educational measures on social security benefits and implementing measures to reduce undeclared or illegal work, ”he said.

T. Kavaliauskas added that the review of the contributions of SSD and PSD could be done by reviewing the entire tax system. “This will be done in coordination with the Ministry of Finance and other interested institutions and social partners,” he warned.

At that time, the government program reports on changes in PSD contributions as follows: forms ”.

Adviser to the Minister of Health Aistė Šuksta said that a systematic analysis of the current situation is currently underway.

“As you know, the action plan must be prepared within 3 months after the approval of the government program,” he said.

For his part, the director of the State Health Insurance Fund, Gintaras Kacevičius, presented several moments to improve the health tax system.

“First, attention must be paid to adequate funding for state-delegated functions (eg ambulance, immunoprophylaxis program, technical orthopedic devices, etc.). In other words, it is necessary to contribute as much money as is really needed to carry out these functions.

A distinctive feature of the Mandatory Medical Insurance Fund (PSDF) for 2021 is that after a long break, the amount of funds allocated for the performance of the delegated functions of the state is provided, as much as are really necessary to guarantee the financing of your implementation: 204 million. euros. At that time, last year only 40 million were allocated for this purpose. euros.

So this year the problem is solved, but a long-term solution is needed. In our opinion, one option would be for the state budget funds to fund these functions to be planned and managed separately from the PSDF funds. Such a solution would ensure that all mandatory contributions to health insurance would be used for their intended purpose, that is, to pay for health care reimbursed by the PSDF, and some of them would not be used to make up for the lack of funds allocated to functions delegated by the state, ”he commented.

Another proposal mentioned by G. Kacevičius is a possible reduction of the gap between the average PSD contribution paid by employed persons and the contribution of an insured person with state funds.

“This year, contributions to the state budget for the insured, who are insured with state funds, are projected at more than 700 million. (estimated increase of € 50 million or 7.7% compared to 2020).

For example, although the state budget transfers more than 700 million LTL to the PSDF budget for people covered by compulsory health insurance with state funds. The need for funds for medical care for these people is greater. That is, it amounts to more than a billion. (For example, in 2019, around € 1.4 billion was spent on health care for these people).

The third thing to note is the increase in social justice through PSD contributions. In other words, the abolition of unjustified benefits, the expansion of the tax base (in this last aspect, the provision of the new Government’s program to move from personal income tax to family income as socially fairer can be considered hopeful). In other words, we must follow the principle that all people with a similar level of income (all income, not just salary) must pay similar contributions.

The implementation of all these directions would guarantee higher income from the PSDF, which means that the population will have access to a wider range of more modern and better quality medical care, ”said the director of VLK.

Inequality

K. Lisauskas noted that the problems of SSD and PSD contributions are similar to other taxes: they are calculated from different bases.

“If on one side of the spectrum there are employed people who pay most of these contributions, on the other side there are those who pay the least: farmers. If they are small, they pay almost nothing. Bigger still a little, but not much. .

People (other than farmers) who also pay much less for the same amount of income can fall in the middle. There are also small communities, a very strange way in which participants (owners) can provide services to their community. This is basically a legal way of not paying the social security contributions of those amounts ”, explained the tax expert.

According to him, the rarities mentioned are difficult to substantiate with economic or justice principles.

“All this inequality must be eradicated,” said K. Lisauskas.

According to the Sodra website, when participating in individual activities, social security contributions (12.52%) must be paid from 90%. Taxable income. When calculating such income, it is possible to deduct from the total income received the expenses incurred, according to the simplified procedure, 30%.

When an individual activity is carried out, the PSD contributions (6.98%) are calculated from the monthly minimum wage (from 2020 to 642 euros).

At that time, if a person is engaged in agricultural activity and their economic holding size (EDV) is less than 4, they only need to pay PSD (from 2.33 to 6.98% MMA)

If you have more than 4 EDVs, you also have to pay VSD, whose contributions can reach 12.52%. from 90 percent. taxable income or 12.52 percent. of MMA if the income is not declared and the person is not a VAT payer.