Latviski English По-русски
Tuesday 17.07.2018 | Name days: Aleksejs, Aleksis

Lithuania moves forward with tax and pension reform

(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU

Linas Jegelevičius for the BNN

The heavily amended bills on taxes and pensions will have a significant impact on the Lithuanian citizens’ lives if Seimas, the country’s legislature, approves for them in their current form.

The drafts envision increase of the tax-exempt personal income threshold, merging social insurance contributions by employees with those by employers, reducing social insurance contribution rates and introducing a ceiling on payments to the state social insurance fund Sodra, as well as to use state budget funds, rather than the social security system funds, to pay basic pensions.

The government also wants to change the way second-pillar pension savings are funded.

Employees will be able divert 2 per cent of their compulsory social insurance contributions to private second-pillar pension funds. Employees may also opt to additionally contribute 2 per cent of their salary, which is then matched by a state contribution based on the country’s average salary.

Plans calls for shifting to a «4+2» formula, stopping transfers from the social security system and doubling salary contributions to 4 per cent.

Government says, with bill in force, the average pension will grow approximately 23 euro during 2018 and 2020 and will be close to 400 euros by 2020.

Disappointingly to many home owners, the legislation imposes duty to pay real estate tax for secondary, tertiary and so on real estate.

«We expect that in June Seimas will get the amendments approved in their entirety, so the President can sign them into effect,» Saulius Skvernelis, Lithuania’s Prime Minister said.

If Dalia Grybauskaitė, the head-of-state, inks them, they proposals be enacted from January 1, 2019.

The ruling Farmers and Greens and the Social Democratic Labour fractions have seemingly enough votes to adopt the amendments, however Skvernelis hoped that the opposition Conservatives – Homeland Union and Christian Democrats, officially – will vote for the bills too.

Amid the apprehensions of some political observers that the far-reaching legislative initiatives can wedge a splinter in unity of the Peasants and Greens, PM downplayed the fear, yet admitted that there is «a wide garden variety» of opinions on the issues of taxes and pensions in the legislature.

According to Stasys Jakeliūnas, an influential «farmer» MP and chairman of the parliamentary Budget and Finance Committee, «part of the MPs» will not support the tax and pension drafts «for surely.»

Linas Kukuraitis, Minister of Social Security, defended staunchly the bills, claiming that they work in favour of ordinary Lithuanians.

Although the legislation received warm reception in general, Vitas Vasiliauskas, chairman of the Board of Bank of Lithuania, regretted that the Cabinet did not heed the central Bank’s proposal on tax reforming.

«The direction is right but we believe it’s insufficient as we believe mid- and long-term decisions should be made during economic upturn for us to be ready when bad times come. This is why we say the proposed package is insufficient,» Vasiliauskas said. «We see this a procyclical fiscal policy which is usually not rational during the time of economic upturn.»

Finance Minister Vilius Šapoka, however, disagrees with the central banker.

«Regarding procyclicality, I would like to pay your attention to the fact that opinions vary. The International Monetary Fund, as we just met with its representatives, does not see procyclicality in the existing situation… Speaking about increasing redistribution, it’s important to note that the redistribution level in Lithuania has been growing at the fastest rate among EU member states over the last couple of years,» the minister told the Cabinet sitting, adding that the Bank of Lithuania’s certain proposals might be taken into account.

Vasiliauskas said in April, after a review of the Cabinet’s plans, that the Bank of Lithuania proposed to abolish business licenses and harmonise taxes for employees and self-employed. The central bank also proposed introducing the universal progressive real estate tax.

The trade unions also doubt the progressiveness of the proposed tax and pension reforms and warned that only higher-income residents will benefit from them.

«We believe that the reform will not achieve its main goal – reduce income inequality and social exclusion,» Inga Ruginienė, chairwoman of Lithuania’s Confederation of Trade Unions, accentuated.

Yet the measures by the Lithuanian Government have to be music to the ears of the European Commission that has long exhorted Lithuania to improve tax collection and social security system.

The Commission released on Wednesday, May 23 its recommendations based on a detailed analysis of the Lithuanian economy and on the country’s national reform and stability programs.

«In order to improve the ability of the Lithuanian budget to adopt a more effective social policy and increase public investment, the European Commission recommends improving tax compliance and broadening the tax base to sources less detrimental to growth,» the European Commission Representation in Lithuania said in a press release.

The Commission especially recommends that Lithuania tackle the problem of pension adequacy, which is among the lowest in the EU.

Leave a reply

EY auditor’s work in ABLV Bank’s liquidation will be managed by its Polish office

The work of EY (previously Ernst & Young) work in ABLV Bank’s liquidation process will be managed by its Polish office, as confirmed by company’s representatives.

Estonia sees no geopolitical change after U.S.-Russian summit in Helsinki

Estonian Foreign Minister Sven Mikser has commented cautiously that the U.S.-Russia summit in Helsinki is unlikely to bring fundamental change in the relations between the West, NATO military alliance and Russia.

airBaltic carried record large number of passengers in June

Latvia’s national airBaltic airline carried 1,876,839 passengers to destinations in Europe, Scandinavia, Russia, CIS countries and the Middle East in the first six months of 2018. This is 20% more when compared to the same period of last year, as BNN was told by the company.

Police to investigate possible MPC fraud at Tukums DH CHP plant

One of the largest CHP plants in Kurzeme – SIA Tukums DH – may have been squandering produced heating energy for a long time, which is a serious breach of mandatory procurement component governing rules, TV3 news reports.

Estonian holidaymakers die in Ukraine, media report

Three Estonian holidaymakers in Ukraine, have been found dead in a hotel in the Black Sea resort town of Odessa last weekend, Estonian media report without identifying the three young men.

Languages «a must-have». An interview with ex-president about political market methods and communist approach

There are two ways a political market is realized during closed presidential elections: one involves approval of candidates in exchange for votes, and the other – for money. If it’s the latter, it is best for no one to know how elections are performed. Harmony, which now stays quiet about open elections, has always been against this proposal, because it does not allow for creating a political market – sale of votes in exchange for influence, which has been done before...

Migration from Baltics, Eastern Europe to UK lowest in years

Migration to the UK from the Baltics and other member states of the European Union has been the lowest it has been for nearly four years in 2017, Britain's official statistics show.

Putin in Helsinki denies U.S. election meddling, Trump doesn't object

At the Russia-U.S. summit Helsinki, a key development has been differences in the attitude by U.S. federal officials to Russian interference in the American election process. Days after Washington charged 12 Russians with hacking the computer systems of U.S. officials, U.S. President Donald Trump has accepted the denial of Russian responsibility expressed by Russian President Vladimir Putin.

Stock exchange indexes showing varied trends; oil prices decline

Stock exchange indexes in USA and Europe showed varied trends on Monday, 16 July. Bank profit rise was reported for Q2.

Rezekne Council deputies will not be penalized for releasing newspaper in Russian language

The court has lifted fines previously applied by Corruption Prevention and Combating Bureau on nine deputies of Rezekne City Council for releasing a newspaper produced by the council in Russian language in addition to Latvian.

Volume of imported petrol in Latvia down 2% in five months

The volume of motor fuel imported to Latvia in the first five months has declined 2% in comparison with the same period of 2017. The volume of diesel fuel has declined 14.9%.

Corruption watchdog ends case about Bi-2 concert in Riga

Corruption Prevention and Combating Bureau ended in May the case regarding possible misuse of administrative resources on pre-election promotion by Riga City Council in the form of a free Bi-2 concert in Lucavsala.

Thailand's rescued boys honour casualty of 17-day rescue operation

In Thailand, a 12 boys trapped in a cave have been rescued in a rescue operation that lasted for 17 days and ended with one casualty, a rescue diver.

Latvian political party Progresīvie to nominate women as candidate list leaders

Latvia political party Progresīvie has revealed its list of candidates for 13th Saeima elections. Five women have been stated as leaders of candidate lists.

Estonia earns 150 000 euros from military evaders annually

Estonian compulsory military service is evaded by about 1 000 young men each year, who have to pay fines that annually exceed the combined total of 150 000 euros.

Chairman: FCMC’s competence should end with termination of licenses if banks are liquidated

In the event of liquidation or insolvency, Finance and Capital Market Commission’s competence should end with revoking affected banks’ license and without the need to appoint an administrator, says FCMC chairman Pēters Putniņš.

Minister: Latvia may terminate MPC system in the next three years

In the next three years or so Latvia could completely terminate the mandatory procurement component system, said Economy Minister Arvils Ašeradens in an interview to Rīta Panorāma programme of LTV.

In pictures: French victory in World Cup celebrated by tens of thousands in Paris

After the football World Cup was won by the French national team on Sunday, an enormous crowd of people gathered in central Paris to celebrate.

Another case of African swine fever infection recorded for domestic pigs in Latvia

African swine fever infection was recorded for domestic pigs in Tērvete on Monday, 16 July. 16 pigs were liquidated because of the infection, as reported by Food and Veterinary Service.

MEP Artis Pabriks becomes political party «Attīstībai/Par!» prime minister candidate

Latvian political party «Attīstībai/Par!» has picked Daniels Pavļuts, Juris Pūce, Ilze Viņķele, Artis Pabriks and Mārtiņš Bondars as its regional candidate list leaders. Artis Pabriks will also be the party’s prime minister candidate.

Russian-U.S. presidents meet in Helsinki

U.S. President Donald Trump and Russian President Vladimir Putin are meeting on Monday in Helsinki.

Heat of up to +30° C expected in Latvia this week

Weather in Latvia will be warm and even hot at times this week, as air temperature reaches up to +30° C. At night, air temperature is not expected to go below +20° C. Many regions will likely experience thunderstorms closer to the middle of the week, Environment, Geology and Meteorology Centre reports.

Week in Lithuania. Lithuania's Tripartite Council fails to reach agreement

Lithuania's Tripartite Council on Tuesday, July 10, failed to reach agreement on raising the minimum wage. Employers are inclined to back the government's proposal to raise the minimum pay to 420 euros. Meanwhile, trade unions want it increased to 450 euros.

BNN summary of the week: NATO to increase and ABLV Bank loses its license

BNN offers a summary of this week’s topical news in a variety of categories: Future; Deal; Fight; Decline; Decision; Opinion.

SEB Bank to unite life insurance companies working in Baltic States

SEB Bank will unite life insurance companies working in Baltic States, BNN was told by SEB Bank’s representative Agnese Strazda.