A riddle for the new rulers: what the right would do with public debt and taxes

After the first round of the Seimas elections, the Homeland Union coalition – the Lithuanian Christian Democrats, the Freedom Party and the Liberal Movement of the Republic of Lithuania – seems more likely.

In total, these parties have already won 38 seats, and in another 19 electoral districts in the second round, voters will vote for one of their candidates. Thus, up to 71 members of the Seimas, the so-called right lacks 14 seats.

Today, a coalition of all the other parties seems to be twice as likely. The Lithuanian Green and Peasants Union, the Labor Party, the Lithuanian Social Democratic Party and the Polish Lithuanian Election Campaign – the Union of Christian Families won a total of 35 seats in the first round and in six other electoral districts (including the Labor Party Lithuanian Social Democrat). So in order to have a majority in the Seimas, these parties must win at least 30 seats in the second round.

What would you do with the debt?

One of the main challenges for the government formed by the new coalition will be the public debt that will reach the highest level in the history of Lithuania. According to the Central Bank, the level of public debt will reach 50% in the near future. gross domestic product.

This is also reflected in the TS-LKD electoral program: “The constant downward trend in interest rates and the public debt-to-GDP ratio since it joined the euro area is reversed by a relatively significant deterioration in the ratio of debt in one year and / or demographic pressures on public finances ”.

However, as the conservative Dainius Kreivys told Delfi, there are no plans to take drastic action on it.

“As the economy grows, if you manage finances efficiently, the ratio naturally decreases. Debt is only growing during periods of crisis and we do not expect the crisis to continue during the next period.

Naturally, the relationship will recover. We are not willing to take drastic measures, because we believe that we must first promote economic growth and reform the economy, ”a Seimas member said Tuesday.

The representative of the Liberal Movement Kęstutis Glaveckas also stated that during the coronavirus pandemic, the growth of debts is inevitable.

“Increasing debt is not the best thing to do, but it is necessary in this period because the whole world has been affected by a pandemic. Stimulating the economy is inevitable, but this increase in debt is not so dramatic,” he said. .

Vytautas Mitalas, representative of the Freedom Party, said that the issue of public debt would be one of the most relevant both when approving next year’s budget and in general when talking about the fiscal sustainability of Lithuania in the future.

“Managing the public debt and fighting to reduce it is one of the proposals of the economic leadership of the Freedom Party,” he said.

The minister still does not have it clear

No party in the possible “right-wing” coalition has yet nominated a candidate for finance ministers. But as K. Glaveck pointed out. this position usually falls to the partner with the most mandates, in this case possibly TS-LKD.

For his part, Mital said that the tradition of the finance minister could change in the future.

D. Kreivys stated that the issue of the Minister of Finance has not yet been discussed in the party. “We haven’t appointed any minister, we haven’t even talked yet. He is waiting for the second round, after which it will be discussed, ”he said.

TS-LKD leader I. Šimonytė has spoken about the candidates for ministerial portfolios.

“First of all, we would evaluate the candidates for minister according to the principle of meritocracy: if a party can offer a person with high confidence in the society, it would not be very important to me personally.”

Well, I would expect there to be significantly more women in government than in this government, “she said Monday after the first round.

I. Šimonytė, imagined in the position of prime minister of some observers, has mentioned that it refers to possible candidates for ministers, but has not yet presented any proposals.

Wants to cut taxes

Speaking about the possible divide between conservatives and liberals, I. Šimonytė highlighted the problems of tax cuts and budget redistribution.

“The classic discussion might be to imagine how much a country can cut taxes and secure funding for education, health care, social security and other important areas,” he said.

Both the Freedom Party and the Liberal Movement are talking about tax cuts in their programs.

“It is necessary to reduce the personal income tax related to employment to 15%. For all, declares the Freedom Party. – Several GPM rates are currently in force: 15, 20, 32, and starting next year will be taxed on an even higher proportion of wages. (…) It is necessary to cancel 32%. Application of the GPM rate. The application of this rate loses the attractiveness of taxing the income of highly qualified specialists, since the applicable benefits of ” roof “of Sodra are removed by additional taxation with GPM”.

The Liberal Movement also proposes to reduce the GPM to 15 percent. and do it in 4 years.

“This is not an easy budget adjustment that will require 400 million. “It is necessary to leave more income for the active and economically active people,” said his program.

The Liberal Movement would also like up to 5 percent. reduce VAT on basic food products. “This will cut the number of purchases abroad in half,” they say.

Liberals would still like to align the amount of tax-free income (NPD) with the monthly minimum wage (MMA).

“We are in favor of a person with a minimum income not having to pay the GPM, but starting to pay it when the income exceeds the minimum level,” said the Liberal Movement.

Finally, they would still like up to 9 percent. Reduce VAT on construction sites. It is said that the prices of legally operating contractors will be more competitive.

For its part, the Freedom Party promises not to introduce any new taxes.

“Existing taxes will change unless they are reduced and focus on more efficient collection of consumption taxes. We will not support progressive taxes and up to 15%. We will reduce GPM related to employment. The tax system will be simple, of course, stable and predictable for companies and investors, “the program said.

Conservatives have a similar view: “We will declare a moratorium on changes in regulatory and tax laws. We will not change laws that have a significant impact on the business environment for some time, but at the same time we will consult with the business community to reach an agreement on long-term sustainable regulatory conditions that will ensure the growth of the Lithuanian economy. “

The Freedom Party offers 0 percent. income tax on reinvested earnings, and conservatives talk of reviewing the tax environment to encourage high value-added production.

Strange Labor Code

Conservatives and liberals may find it more difficult to reconcile approaches to regulating industrial relations.

“Based on pilot projects in individual sectors and companies, we will initiate amendments to the Labor Code, which will allow the employee and the employer to freely agree on the length of the working day, the nature or the working hours. We will abandon the principle of universally determining the duration of a working day or week, we will allow the parties to reach a reasonable agreement, we will ensure a free agreement between the parties and we will avoid unfair pressure from one party to another, “suggests the Freedom Party.

They would also like the Sodra “ceiling” to apply to the insured person and not to the workplace.

“The” ceiling “and the contribution bases of Sodra for all residents must be consistently harmonized so that their contributions do not depend on the activity or form of activity that is carried out,” urges the program.

TS-LKD maintains that the public administration would seek to reduce the state apparatus in areas of the economy where it operates inefficiently.

“For example, in public procurement, we will seek to minimize the human factor, which opens the door to both inefficiency and corruption,” his program said.