Run a cold shower for lawyers and other high earners – earn millions and pay ridiculous fees

M. Majauskas does not hide that he became interested in higher salaries and income after representatives of large companies offered to reduce taxes on those who earn the most. The deputy saw that there are professions that should make a greater contribution to the budget.

“According to STI data, in 2019. The individual operating income of the ten highest-earning lawyers averaged € 2 million per year, of which the personal income taxes paid were less than 6%. E.g. the lawyer with the highest income declared 4.2 million during said period. and paid 5.1 percent. income taxes. By comparison, the employment tax rate is 20 percent and the amount exceeds 87,000. EUR – 32% “, – says M. Majauskas.

According to the data provided, approximately 1,900 lawyers are engaged in individual activities in Lithuania, and in 2019 they received 122 million. revenue billing in euros.

“On average, a lawyer declared 68,000 euros of annual income and paid 7 percent. income tax. The 100 top-earning lawyers in Lithuania earned an average of 700,000 a year and paid 7.7 percent. Meanwhile, the annual income of the rest was significantly lower and averaged 31 thousand. euros “, – see M. Majauskas.

It is true that it is not a taxable income: the income of lawyers is currently taxed in the same way as the individual activities of other professionals and deductions from them are allowed, applying 30%. rule, or based on actual costs incurred. Taxable income is derived from turnover less deductions.

It is possible to deduct, for example, office expenses, salaries paid to assistants. 5-15% applies to individual activities. GPM rate, gradually increasing to 35 thousand. by year.

“It could be a textbook example of the wrong tax system. We will consult with the Government on concrete decisions and we will try to correct this injustice as soon as possible. Although the number of lawyers is not large, the applied preferential tax rate deprives the state of significant income per year. After adjusting the rates or the permitted forms of activity, up to 5 million euros of additional income from the state budget can be expected per year ”, M. Majauskas is convinced.

He assures that he will also be interested in the income of other specialties or fields with higher income.

In this context, it will be necessary to discuss how to adjust the relevant rates or change the possible forms of activity. This is not the last analysis of this type ”, says M. Majauskas.

Attorneys: These are not responsible statements

Mindaugas Kukaitis, vice president of the council of lawyers, affirms that the income of the lawyer is not equal to the net profit; From this income, the lawyer assumes the operational risk, has to maintain his office and employees, pay various rents, real estate taxes, insure professional liability and so on. He ensures that even with a high income, it is possible that the activities of a lawyer may even be unprofitable, so it cannot be compared to a salary.

“It just came to our attention then. I would like to respond that it is not correct to evaluate the above data and draw conclusions from it now, as the financial burden on attorneys and paralegals has already increased, from a taxable base of 50%. Increased. at 90%, income must also be evaluated in the context of quarantine restrictions, which significantly affected the activities of lawyers ”, M. Kukaitis is surprised.

According to him, the community of lawyers is small, with 2,100 lawyers, and it is not fair to rely solely on extreme cases in which the income is higher or lower.

“On the one hand, it is stated that the average income of a lawyer is 68 thousand. Here it is indicated that, excluding the relevance of the 100 lawyers with the highest income, the annual income of the remaining ones amounted to 31 thousand euros on average. euros. Consequently, the average monthly income of a lawyer before expenses and taxes was less than 2,600 euros, which is not a basis for changing taxation again, ”says M. Kukaitis.

He highlighted that the highest-income lawyers pay not only GPM, PSD, VSD, but also VAT. M. Kukaitis calculates that if a lawyer does not receive a large income, like any self-employed person, he is subject to 5%. GPM. So, the total tax burden on all income received reaches 15.78 percent. (GPM + PSD + VSD). And if the income is high, the total taxation is 22.78 percent. When the income exceeds 45 thousand. 21% is still paid. VAT.

Consequently, starting at 2,583 euros, after paying all fees, the lawyer receives about 2,175.40 euros “in his hands” every month. From these should be deducted all the costs incurred: telephone bills, fuel, office rent, liability insurance and all other work equipment that a frequent employee receives from the employer. In this way, the average monthly “salary” of a lawyer is usually close to the average salary, despite the image that is formed in society, which is often lit up and reported as a member of the Seimas “, outraged the representative of the attorney.

He stressed that individual activities are not limited to attorneys and they all pay the same fees.

“Changing the tax burden on individual employees is the same as banning such activities in Lithuania, as a higher tax burden would destroy individual activities. It must be borne in mind that all persons who carry out individual activities, including lawyers, must support themselves, their jobs, pay vacations and accumulate their pensions independently, ”says M. Kukaitis.

It contradicts M. Majauskas that a “low tariff” is formed: “Income is wrongly equated with profit. These are different concepts. Furthermore, the PIT assessment alone does not assess the entire other tax base. ‘

“The” millionaire “presented by Mr. Majauskas must be evaluated taking into account the particularities of the law firm’s activity. Because the law firm is not a legal entity, the lawyers associated with the law firm account for all income received” by your account “and report this income to all other attorneys in the law firm, assistant attorneys, who independently pay all the above income. taxes and salaries to other employees. Therefore, after deducting all the above mentioned taxes, VAT , taxes on employees, salaries, maintenance of one’s own work and that of others, only then would it be possible to compare and see what that “benefit” is, says M. Kukaitis.

It also considers that an increase in the taxation of lawyers in solitary confinement would be discriminatory and that all the self-employed should be treated.

“After the first quarantine, we conducted a survey of lawyers to see if and how much income had changed. That’s as much as 63 percent. the lawyers noted that the amount of services rendered was reduced by as much as 53 percent. noticed a significant decrease in income. Up to 18% of those surveyed. stated that he had not carried out any activity or provided services during the first quarantine, and applied for state subsidies. Therefore, it is not clear what the situation will be after the second quarantine, which is still ongoing, so it is too early and wrong for all Lithuanians to talk about taxes during such a difficult period ”, concluded M. Kukaitis.

Lisauskas: The tax burden varies twice

Kęstutis Lisauskas, partner in the tax practice of the professional services company EY, also appreciates that not only lawyers, but also the self-employed in general have significantly more favorable tax rates compared to employees.

“It just came to our attention then. Of course, this is relevant not only to lawyers, but also to other people involved in individual activities. This injustice has mainly arisen in recent years from various GPM and Sodra tariff reforms. Because some Once, everyone was subject to the same 15 percent. The GPM rate and the differences were more on the Sodra side. And now the differences are really big enough and especially in the high-income box. If you take a person with the same amount of income who works under an employment contract, you will see that that person pays 32% to the GPM, while a lawyer pays 15% ”, says K. Lisauskas.

He stressed that lawyers and other freelancers typically have 15 percent. GPM pays not of all revenue, but only 70 percent. income received or less.

“People can deduct 30% of income as considered operating expenses. There is some logic, because if a person performs an individual activity, they may incur some costs. In the case of lawyers, there are law firm expenses and But there are many cases of individual activity in which these expenses are not practically present, but the person still has the right to that 30 percent. private “, says K. Lisauskas.

He saw another inequality: there are differences between the “ceiling” of Sodra’s contributions.

“After the end of this year’s reform, those who work in employment have the Sodra contribution ceiling at 60 average salaries, and for some reason they have 43 VMU that are dedicated to individual activities. Although in terms of insurance, be it health or pension, a person is not different, does not belong to him, works or performs individual activities, statistically the parameters of his life are the same, “says K. Lisauskas.” Certainly inexplicable. “

And that’s not all: Sodra taxpayers do not calculate their individual activity from the total amount of taxable income received and not even 70 percent.

“For whatever reason, again, without any explanation, that 70 percent. The portion of revenue from which GPM is calculated is multiplied by 0.9 before calculating Sodra’s contributions, which are further reduced. If you add all this, and if you compare even a million wage earners in terms of employment contracts and individual activities, you will see that the tax burden is probably twice as different, ”says K. Lisauskas.

I would argue that the taxation of all individual activities should be reviewed.

“It is not necessary to renounce individual activities. In any case, it is common in the world for the self-employed tax burden to be somewhat lower than that of employment, because the self-employed continues to bear more risk and does not have the same guarantees as the self-employed. But those differences are not that great. Especially in high-income modes, one of the basic principles of taxation is the ability to contribute. If there is a progressive tax system for labor relations, then by analogy it should also exist for labor relations. individual activities ”, assures the tax expert.

And Sodra’s contributions, according to him, should not depend on whether they are paid by a farmer, a lawyer or an employee; they should apply equally.