The idea of ​​an investment account hopes to persuade Lithuanians to continue bank deposit.

On Wednesday, the Seimas Budget and Finance Committee discussed the idea of ​​creating an investment account in Lithuania with financial specialists and market participants.

According to the idea of ​​the Lithuanian Ministry of Finance, companies investing through an investment account would have to pay the personal income tax only on the investment received, which is used for purposes other than reinvestment, and only when transferred to investment account.

We need to work, save and invest to have a higher income, a more comfortable life and a dignified old age. We are aware that there are already several tax incentives to encourage investment. However, we must be open to the fact that, although we accumulate pension funds in the second pillar, without additional savings in old age it will be in the best case with a can of beer on Justiniki 7 TV. by the sea once a year or enjoy the Spanish sun. Unfortunately, the state will not do that for us, the issue was raised by Mykolas Majauskas, chairman of the Seimas Budget and Finance Committee.

The Ministry of Finance, which has prepared guidelines for investment accounts, emphasizes inefficient Lithuanian savings.

We now have a situation where two-thirds of households say they are saving a little. But the savings are on the bill. 70% of the moni say they keep their last time as an indl bank. That population could be employed, thus stimulating capital markets, which are shallow, argued Vaida esnuleviit, deputy finance minister, at the committee meeting.

According to the deputy minister, the investment account could be intended for middle-income companies that can and want to save both on retirement and on larger purchases.

Such an account could change administration and thus encourage companies to save by investing their money, said V. esnuleviit.

The committee chairman emphasized that the investment account should be for the middle class and not for those with a limited size, without any tax arbitrage. According to M. Majauskas, the investment account should serve as a complement to the accumulation of pensions, not as a substitute.

We must continue to accumulate pension funds in the second pillar, said M. Majauskas at the meeting, adding that the person could actively manage their investments by themselves, and not, for example, send them to Invald.

Bank of Lithuania position

The main advantage of an investment account, say the initiators, would be its tax administration and the incentive provided for deferral.

In particular, tax relief (and tax deferral is relief) is the reason why the Bank of Lithuania is cautious about the idea of ​​an investment account, warning that the investment account should be natural and adapted to the tax burden of the country and not allow tax arbitration.

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An investment account is a nice thing to do, but the devil is in the details. Those details are even critical in deciding whether the current offer in the tax system is appropriate or not. This measure is very important for the tax administration, Gediminas Imkus, a member of the Board of Directors of LAC, spoke at the meeting.

The LB representative compared the investment account with three-tier funds.

We already have a tool where individuals can invest extra in the financial and capital markets and accumulate for retirement, but in that place, if we are talking about investing and investing in the capital market, if they simply buy shares not through a investment account, why should that taxation be different? klausim kl G. imkus.

Monitor neighbors

Vytautas Plunksnis, Chairman of the Board of the Investors Association, highlighted the insufficient number of investors.

Lithuania’s savings rate is tragically low, and for much of the year, as a country, we spend more than we work. Only in 2019 was there a positive savings rate. According to financial textbooks, people have to save 10-15% of their income to save for old age, which is not the case today, because people do not understand things that are too complicated for them. The investment account is mainly intended for retail investors, through it it is possible to invest only financial assets that are listed on stock exchanges or are investment funds, structured products, says V. Plunksnis.

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The Chairman of the Board of the Investors Association showed the Estonian and Latvian investment account models.

The model chosen there is that, as a company that does not pay a dividend, it can defer the payment of income tax, and resident investors can defer the payment of the tax if those funds are not taken for consumption, says the president of the association board.

The main advantage that V. Plunksnis points out is the simplicity that the investment account provides.

All you have to do is find out if we have deducted more than you have. In addition, the provision for the tax administration would be simpler for the state, because now the inspection has to go through each transaction, which is a very big note, to verify whether the man has declared it correctly, says V. Plunsknis.

The speaker noted the temporary reduction in revenue from the state budget due to the deferral of taxes.

And there is a risk that companies, without understanding what they are doing, will buy some individual stocks. Yes, Tesla shares showed a record, but those who were victimized could fall, V. Plunksnis said.

Deimtadalis indli

Mindaugas Tutlys, Luminor Savings and Markets Product Manager, illustrated the relevance of the investment account by comparing the share of retail investment securities in deposit volume.

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In Lithuania it is 10%, it is necessary to keep ten times more in deposits in Lithuania than in investments. In the EU, for example, it is 48%, half of what is held in deposits is held in investments. In other words, there are five times more investments in Europe, which is necessary so that Lithuanians, who make a large amount of money deposits, do not make a profit. And when they reach old age and have to pay a pension, Lithuanians will depend on Sodra, at that time Europeans will earn larger sums and have an additional pension, commented M. Tutlys.

M. Tutlys emphasized the benefits of investment accounts for Lithuanians trying to build and rebalance their investment portfolios.

It is important that companies keep investment in tolerance to risk. I can’t keep saving stocks because they are too risky for me, but I can’t put bonuses because they don’t work for the payment, I put it in half. Imagine the stock markets doubled a couple of times and bond values ​​fell. It is possible that now 80% of my portfolio is in stocks, which is no longer acceptable because my risk tolerance is 50%, which means that I have to rebalance the sale of stocks and the purchase of bonds, but under the current system penalizes me for rebalancing because I have to pay taxes. An investment account encourages long-term investment, does not penalize rebalancing, and promotes long-term savings. If I roll over, my taxes are deferred, Tutlys said.

Statement concerns

Gediminas Milieka, Savings and Investments Manager at SEB Baltic, proposed applying the capital gains deferral model to the investment account until the money is withdrawn.

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We are the last in the region that we do not provide this incentive and we do not encourage companies to invest in this way. When working with clients, we see how much the tax declaration causes them, how much they worry about the examination of the Tax Inspection on the other hand, the provision of additional services. This is a successful simplification, says Milieka.

It is not a substitute

Marijus Kalesinskas, chairman of the board of directors of the Association participating in the Pension Fund, paid attention to the fact that the initiative has long been necessary, which accumulators support. However, it should be understood that an investment account is not a substitute for pension accrual.

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It is possible to make a great effort, but it is not necessary. For us now, there is no lack of instruments, it is the second stage, there is a third stage with all the solutions. There is a lack of a simple way for small investors to manage their savings. This would be beneficial for absolutely all companies that have savings and want to invest effectively for several years instead of keeping them at zero wages, says M. Kalesinskas.

Eivil Ipkut, president of the Lithuanian Banking Association, noted that bank deposits currently contain record amounts of money.

Now is a particularly good time to consider initiatives. mons are saving and investment opportunities are very low. We are pleased not to postpone this issue any longer, but to consider it immediately, said E. ipkut.

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