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If the first proposal were implemented, employers whose payroll – all employee wages – increased by 8% could pay less income taxes for five years.
Another proposal provides for an increase of 15%. Up to 20 percent increase the personal income tax by 35 thousand. annual income of more than 1 million euros from individual activities, dividends and capital gains.
It would be useful for the crafty
Daiva Čibirienė, president of the Lithuanian Association of Accountants and Auditors, is cautious about the proposals put forward by the president.
“I see that the Presidency has slightly modified the tax relief that we offered previously. We have proposed a benefit similar to the one currently applied to the support provided. T. and. Part of the wage bill, such as 20-40%. Or another amount (which can be discussed), allow deductible deductions.
Salary increases are very difficult to calculate and manage. Also, there may be a company that already spends a lot of money on employee salaries and another, minimally. This could take advantage of the benefit offered by increasing wages, although it could still pay much less than the first ”, commented D. Čibirienė.
According to her, this would give the benefit to an employer who doesn’t pay a higher salary right away, which would be an incentive to pay a lower starting salary so that the benefit can be used later.
“There may be situations where the starting salary is only partially ‘blank’ and we will see an increase in the statistics when the employer starts paying it in full ‘blank’. According to this procedure, the employer would be motivated to pay part of the initial salary in black and part in white, and then increase it ”, explained the head of the association.
For those who pay a lot, nothing good.
Swedbank chief economist Nerijus Mačiulis says the corporate tax break initiative on pay increases is a good one.
“But I see another problem with that. In a sense, it would discriminate against companies that already pay above-average wages. They are less likely to keep increasing wages quickly and could not receive any tax benefits.
For example, if we talk about attracting foreign direct investment, then those companies with foreign capital reach sectors with high added value with higher than average salaries ”, the economist compared.
Therefore, according to N. Mačiulis, they would not benefit from the proposed tax relief.
“This measure is not focused on promoting investment, rather than on attracting high value-added foreign direct investment. More to the withdrawal of the wage bill from the shadows in those companies that officially pay the minimum wage or simply more. Well, in a sense, it would have an incentive to pay higher salaries officially and thus obtain a corporate tax credit ”, the economist is convinced.
According to him, this is not bad, perhaps the innovation will pay off and help promote more transparent salaries. However, the problem is likely to persist that we will not be more competitive in the fight for foreign direct investment.
“I would like to point out that Latvia, Estonia and Poland have a tax break for reinvested earnings. Estonia applied it quite a long time ago, 20 years ago, Latvia a couple of years ago and now Poland. Therefore, it competes for a large foreign direct investment. .
While the company reinvests the accrued profit, until it is removed from the country, until it is reinvested in job creation, technological renovation, then no income tax is applied. In this sense, we will continue to lag behind even after implementing this proposal, ”lamented N. Mačiulis.
Are the maximum limits for higher taxes too low?
According to D. Čibirienė, President of the Association of Accountants and Auditors of Lithuania, high rates of income tax could be applied to high income from individual activities, capital gains or dividends, as proposed by the President.
However, according to the head of the association, 35 thousand. The annual income threshold, beyond which you would have to pay more, could be higher.
“I would suggest raising that threshold more slowly and in longer intervals. If we deduct taxes from this amount, it will turn out that a higher rate will be applied to income that is not taxed at all in other countries, and it is difficult to support even children. with them.
I think it would be possible to start gradually, for example, from 120 average salaries (120 VMU = 162.3 thousand euros).
This 120 VMU limit has been applied for several years to all income other than employment or similar income, except for dividends and income from individual activities. Therefore, it might be worth applying that limit to the unemployed also at the beginning ”, considered D. Čibirienė.
She is convinced that the highest rate of 35 thousand will apply. € a year, smaller taxpayers won’t run away and avoid higher taxes. However, those who win the largest sums can flee Lithuania, as there will be a significant incentive to do so.
A step towards fairer taxes
Swedbank chief economist Nerijus Mačiulis believes that a higher income tax on unearned income would, in a sense, be a step towards a fairer tax route.
But again, let’s point out that this is a very symbolic step that will affect a very small part of the population. Such dividend income is received by business owners or people with a large amount of capital.
Here there would be no significant impact on public finances, which would not significantly increase budgetary income, although some justice would appear ”, commented the economist.
However, he noted that there are currently major problems with illegal taxes in Lithuania.
“There are many more people who do not raise capital and are subject to lower tax rates. I think the problems should be addressed here. But probably that working group under the Ministry of Finance will identify problems and discover unnecessary benefits,” expected N. Mačiulis.
The presidency estimates that, judging by 2019, a tax higher than declared income would apply to approximately 2.9 thousand. population earning more than 35 percent. non-work income.
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