The rich find ways to pay less taxes: Majauskas offers to measure everyone by the same rule

The higher a person’s income, the lower it is related to the employment relationship, and the less income tax is paid, according to data from the State Tax Inspection (STI).

Among those who earn the most, the wages of 2019. only 10.4 percent. your income. They received most of the income from individual activities (33%), as well as 17.7%. its income from the transfer of securities amounted to 16.8%. – dividends and other payments of profits, 10.3 percent. – transfer of assets.

On the contrary, there are low and middle income recipients: wages accounted for about 80 percent. their income, individual activities added up to 10 percent.

Consequently, a different income structure allows the rich to pay a lower share of GPM on income.

The estimated effective tax rate among low- and middle-income individuals ranges from 11 to 14 percent, while high- and very-high-income individuals paid only 8.5 percent, respectively. and 6.55 percent. effective tax rate, according to the State Tax Inspection (STI).

“In Lithuania, the people with the highest income declared an average income of 36 thousand euros per month. Those who receive more than 10 average monthly salaries are less than 9 thousand people and represent 0.7 percent. all persons who declare income. It is interesting to note that these people paid on average only 6.6 percent of the income received. Personal Income Tax Cash ”, – shares M. Majauskas.

He compares that the average income in Lithuania is received by about half a million people and the effective income tax they pay is double (13.9 percent), and these differences are due to different sources of income and tax benefits.

20% is applied to salary. The PIT rate is a benefit for low-income people, so-called tax-free income. And high-wage recipients should already pay 32% for the part of the salary that exceeds the so-called Sodra ceiling. GPM. However, income from individual activities is taxed at 5 to 15 percent. Taxable income can be deducted from miscellaneous expenses incurred or 30%. There are many other income tax benefits.

Even gifts make up a big part of the income of the wealthy. In the higher income categories, gifts accounted for 3-4%, at that time among those earning the minimum or average wage, gifts accounted for only 0.2%. entry.

“The middle class is the one that receives the most income from employment, which represents 77%. Of all their income. Meanwhile, for people with very high incomes, the employment rate is only 10 percent. Income. (. ..) Due to various benefits, exemptions and non-taxable income, the effective tax they pay is significantly lower ”, says M. Majauskas.

Offers to add income and then tax everyone equally

M. Majauskas proposes to increase the equity of the tax system by unifying taxation with income tax.

“The different effective income taxes highlight the fundamental flaws of the tax system. People with higher incomes in Lithuania pay twice as much taxes as the majority of the population. The solution is simple: add income regardless of its source and apply progressive rates to those who receive the highest incomes. It is important to emphasize that this is not part of the political agenda of the left or right, but an elementary issue of justice, which should have been resolved a long time ago “, suggests M. Majauskas.

The MP is outraged that when they start talking about the fairness of the tax system, business organizations that unite the richest Lithuanian citizens “are often in a hurry to complain that we are returning to communism.”

“It’s only interesting why the same businessmen or lawyers don’t have similar thoughts when walking around Paris or London, where income taxes for people with higher incomes are sometimes higher than in Lithuania. Fair taxes contribute to motivation. from the general public to pay taxes. It also ensures the necessary income to finance public services and social security, “says M. Majauskas.

The high level of social exclusion in the country, insufficient funding for education or other areas are the consequences of an incorrect tax system.

“Of course, the quality of Sodra’s education or pension is of little relevance to those who receive the highest incomes, having the opportunity to acquire good quality services in the private sector,” said M. Majauskas.

Points out that more than 90 percent. He received 5% of the income from dividends, securities transfers and bonuses. the highest income population in the country.

The review of tax incentives is currently being carried out by a special working group created by the Ministry of Finance, which should present its proposals in the autumn.

21.7 percent income for 2019 stated that their income was only 12 times the minimum wage or less.

Another 37.1 percent. Income declared between the minimum and average salary, which in 2019 amounted to 1,296 euros “on paper” per month.

Earnings between one and three average salaries were reported at 35.9 percent. contributors.

More than three average salaries earned 5.33 percent. people who reported income, including 8,908 people with a monthly income of 10 average wages or more.

Izgorodin would suggest not rocking the boat in rough seas

Alexander Izgorodin, an economist at Brandnomika, is skeptical of the fiscal adjustment proposal until there is a clear core for the COVID-19 pandemic. He also warns that higher dividend rates could mean a capital outflow from Lithuania.

“In my opinion, now, in general, may not be the time to do all kinds of tax reforms, because we have some uncertainty. “A new tax model, whether good or bad, will probably bring a lot of anxiety to the market, which may not be necessary at this point,” says Izgorodin.

He noted that the PIT budget has a relatively small share of revenue and that the budget is covered primarily with value added tax (VAT), which is the focus of efforts to collect this tax.

“GPM is a very small part and I would say that it should not be a priority today. A new model must be accompanied by a cost-benefit analysis: if we have a new model, how much additional revenue will it generate compared to the previous model? If the difference is very small, you may not need to do it at all, “says A. Izgorodin.

However, the economist did not object that a clear and simple system would benefit both taxpayers and the state.

“I would say that we can really make changes and reforms when we see the end of the COVID-19 virus, when life returns to normal, when we no longer have to consider whether we need to introduce some restrictions in the fall or not.” . It is difficult to say when it will happen. “Now the situation is clearly getting worse, and if it were done now, I think people are already worried about what will happen with the quarantine, the additional tax changes would make it even more difficult for everyone to catch up,” says Izgorodin.

He believes that the GPM should be generally small, competitive compared to other states, so that people have more money to consume.

“We need to see what neighboring countries are doing so that capital does not flow elsewhere. The most sensitive aspect is the taxation of dividends. The people who receive dividends are really smart and they become friends with finances. If taxation dividend would become very high, it would just spread the capital somewhere to other countries that apply a low tax. “Why is Ireland now attracting a lot of investment and capital? They have a very attractive dividend rate, “Izgorodin said.