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According to Deputy Finance Minister Rūta Bilkštytė, the main direction of the tax relief review group is the green course: promoting a sustainable economy. This group of benefits includes benefits for fossil fuels used by the population and businesses, a portion of VAT benefits for heating (9%), as well as a number of specific benefits for fuels used in various agricultural activities.
At the meeting, Inesis Kiškis, director of the Department of Investments and Economic Measures of the European Union of the Ministry of Environment, said that the Ministry is in favor of reducing the amount of benefits and subsidies.
“Subsidies are a good thing when you have to start something, but in the long run, the longer the subsidies are maintained, the less they benefit the recipient of the subsidy because they are not seeking innovation. It is gratifying that this government is undertaking the elimination of subsidies, but it is necessary to chart a clear path when subsidies are eliminated so that they distort the market as little as possible, “said a ministry spokesman.
Photo by Vidmantas Balkūnas / 15 min photo / Lithuanian Ministry of the Environment
According to him, the Ministry of the Environment supports the abolition of fossil fuel subsidies, the gradual introduction of the CO2 component in taxes and the gradual elimination of the VAT exemption for heating. At the same time, renewal should be encouraged and supported, the work of which, according to I. Kiškis, we already have.
Another aspect of the green tax would be the car tax, which has been in force in Lithuania since 2020. July, revision. “We raised a certain amount of money with it, but its aim was not to raise more money for the budget, but to encourage people to choose cleaner vehicles,” said I. Kiškis.
Photo by Julius Kalinskas / 15min / Aušrys Macijauskas
Aušrys Macijauskas, representative of the Council of Agriculture, said the reasons for these benefits must be answered, either to raise more money in the budget or to promote change.
“Taxes should become an incentive. If we talk about fossil fuels, taxing them should be an incentive to opt for cleaner energies. That incentive should be pursued in areas where there are low-cost alternatives. There are areas where there are no alternatives, for example, a tractor cannot run on wood or electricity. It will take many years for agricultural machinery. Producers in competing countries enjoy such benefits, “warned the farmer representative.
Both in response to A.Macijauskas’ question and later during the meeting, R.Bilkštytė emphasized that the main goal of the reform is to collect more budget taxes by forgoing inefficient benefits. He also stressed that the goal is to assess what benefits are beneficial, not just give them up.
The NPD will not be touched, but you can expect a review of other benefits
Another important transformation direction is reduce income inequality. Eglė Čeponytė, senior advisor to the Group for International Cooperation and Support for Strategic Decision of the Ministry of Social Security and Labor, said that the review of tax benefits should be carried out in accordance with the principle of social justice.
“The impact of these benefits and their abolition on socially vulnerable groups must be assessed. Let us not forget that Lithuania has one of the highest indicators of energy poverty, risk of poverty and social exclusion among EU members. Compensatory mechanisms are needed “, He said.
Some of the existing benefits are also related to personal taxation. For example, freelancers can deduct 30% as expenses. the amount of your taxable income. Furthermore, property and gifts received from family relatives by inheritance have not been taxed so far. This latest budget benefit is estimated to cost up to $ 65 million. by year.
Rūta Bilkštytė
Due to the amount of non-taxable income (NPD), the largest losses of budget income are experienced, but the position of the Ministry of Finance is not to make changes to this tax category, said Deputy Finance Minister R. Bilkštytė.
The adviser to the Minister of Economy and Innovation, Ieva Valeškait señaló, pointed out that it would be possible to consider a progressive abandonment of GPM. “Their refusal should be seen in the context of creating high value-added jobs, as well as making the Sodra contribution ceiling work in this way.” We have raised considerations on the incentives for attracting talent from abroad, which should fall within the scope of tax benefits ”, said the advisor.
I.Valeškaitė also hinted that in case of prolonged quarantine, it may be necessary not only to review the old benefits. “There is a growing need for temporary tax breaks for the most affected sectors, including accommodation, restaurants and sports clubs,” he added.
Photo from personal archive / Ieva Valeškaitė
The earnings review can also affect earnings reinvestment, as this is another priority for this group.
Under the current regime, investments in qualified fixed assets reduce the amount of taxable profit to 100% and the unused amount of investments is carried over to the next 4 years.
Elena Leontjeva, director of the Free Market Institute of Lithuania, spoke about the fact that when reviewing this benefit, it might be necessary to move to a simple single tax model, which would allow both smooth tax collection and reduce shadow.
LLRI nuotr./Elena Leontjeva
“The zero reinvested income tax rate that we had from 1997 to 2002 was the key to moving from shadow to legalization. I would like to create a tax system that has minimal incentives for people to hide something. The experience and economic logic of the neighbors show that if we follow this path, companies will invest and people will earn more. It is important to delay the reform so that we can seize the moment of the movement of capital from Asia to Europe, “he said.
Insurers ask that the financial education of the population be taken into account
One of the innovations proposed by the ministry, the investment account, also found its place in the discussion. It could replace the various fringe benefits available from the investment, as is currently the case with the personal income tax credit for pension accrual.
In the case of an investment account, taxation would occur only if the accumulated funds were withdrawn from that account. It is true that the amount of contributions would be less than withdrawals.
Artūras Bakšinskas, President of the Lithuanian Association of Life Insurance Companies, stated that he evaluates this model positively, but not as an alternative to the benefits of second and third pillar funds.
Photo from personal archive / Artūras Bakšinskas
“We are not opposed to being allowed to invest through such accounts in some of our unique products for more financially savvy consumers. However, we believe that investing through such an account is not suitable as an alternative to those products that are periodic such as second pillar pension accumulation products. They are for non-professional investors, ”he said.
A.Bakšinskas added that such relief was first introduced to shape the behavior of the population, to form the basis of investment. “The financial education of our population is the lowest in the EU, so the penetration and density of our products are among the lowest in Europe. We believe that it is too early to give up such a benefit for now”, added the representative.
The amount of benefits evaluated by the group represents one third of all benefits.
Meetings of the Tax Incentive Review Working Group will be held every month through October. The next discussion will take place in April, when it will try to reinvest the profits. The model of long-term investment and savings instruments will be discussed in May and the June discussions will focus on the green course. A review of special tax benefits and conditions will take place in July, and a debate on reducing income inequality will take place in August. In September, the groups will meet on topics related to strengthening the municipality’s financial independence. In October the general conclusions of the discussions and the vision of the Ministry of Finance will be presented.
The total cost of benefits to the Lithuanian budget per year is approximately 2.2 billion. euros. The value of the benefits considered by the task force is approximately one third of this amount: 790 million. euros.
It is planned that the group can continue working until at least 2022, and that the tax reform can take effect in 2023.
In total, the working group is made up of 39 representatives from various state institutions, non-governmental organizations and companies.
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