bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Sunday 17.02.2019 | Name days: Konstance, Donats
LithuaniaLithuania

Lithuania pins 2019 budget hopes on 200 million euros «out of shadow»

FaceBook
Twitter
Draugiem
print
(+1 rating, 1 votes)

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

Lithuanian Minister of Finance

Linas Jegelevičius for the BNN

Lithuania’s record, revenue-wise, budget for 2019 is hinged on two key joints: the further growth of economy and the ability of the Farmers and Greens-orchestrated Government to extract a staggering 200 million euros out of the shadow economy.

The Government says the budget with 1, 516 billion euros in revenues, a 19,7 per cent year-on-year increase, is «reasonable» and «feasible», however the rosy numbers caught many economists in surprise – they have called the budget «blown out» and «advertising presumable deeds» of the ruling majority.

«We esteem that an amount of around 200 million euros can be collected and added to the budget,» Vilius Šapoka told the parliamentary Committee on Budget and Finance on Wednesday, October 24.

According to the minister, the shadow economy is shrinking for natural reasons, including economic growth, but major progress has been achieved in this area by the State Tax Inspectorate.

«Those additional measures of fighting the shadow economy it is taking and giving the result,» the minister said.

The government’s total tax revenue in 2019 is expected to grow by 30.1 per cent next year compared with this year to 8.019 billion euros. The value-added tax (VAT), the largest single source of tax revenue, should increase by 8.8 per cent to 3.85 billion euros.

The Minister’s high expectations on the budget collection can however be dampened by signs of a looming new economic downturn, which is being mentioned by more and more economy pundits.

However, most Lithuanian experts believe that Lithuanian economy in 2019 will be performing okay «out of inertia». Yet the Cabinet’s spunk to pull out a hefty 200 million euros out of shadow raises doubts to many.

Among those who expressed concern about the Government’s determination were the front runners in the presidential race polls, Gitanas Nausėda and, to a much lesser degree, Ingrida Šimonytė, both economists.

«The target – collecting an additional 311 million euros of added value tax, VAT, of which 104 million euro would be due to the improved administration of the tax – is very ambitious but is it feasible? Do we have the reserves for the kind of improvement? It is very likely that, even with some good measures in hand, the final result can be way different from the one we expect,» Gitanas Nauseda, former chief economist at SEB Lithuania Bank and now the front runner in the presidential polls, wondered last week.

Ingrida Šimonytė, the front runner in the Lithuanian Conservatives’ internal presidential campaign, has mostly circumvented the topic perhaps being reminiscent of her futile attempt to extract 1 billion litas, or nearly 300 thousand euros, from the shadow economy during 2010-2012.

Šimonytė, the-then Finance Minister in the Conservatives-led Cabinet, was among those who approved of the Government’s measure then, but the plan failed loudly with the Conservatives being ridiculed in the press. It seems that Lithuanian politicians have been taught a lesson and, now, the new composition Cabinet is revisiting the initiative.

Lithuania’s 2019 budget aims to have a record surplus and will focus on allocations to education, health care, innovations and reduction of social inequality.

According to the budget draft, the state budget’s revenue is set to rise 19.7 per cent, or 1.516 billion euros, to 10.587 billion euros, and expenditure will increase 22.2 per cent, or 2.121 billion euros, to 11.681 billion euros. The state budget’s deficit will stand at 1.095 billion euros, up 2.2 times, or 605.369 million euros, from this year’s planned deficit of 489.171 million euros.

Minister Šapoka claims that the new budget is a reflection of «structural and strategic reforms» being carried out by the Government, but Šimonytė was among many MPs to lambast, saying she «cannot» remember «a single reform» carried out by the Cabinet.

Justas Mundeikis, economist and lecturer at Vilnius University, also doubts the Government’s plan curtailing the voluminous flows of “black» money.

«Two sources are foreseen to supplement national budget. The first is from the growth of economy and the other is from the reducing of the shadow economy. Indeed, we can, more or less, plan growth of the economy, but not reduction of shadow economy,» he told BNN. «Thence a big risk that we can stumble upon the road and fail to collect the budget as we wish,» he added.

Different surveys show that shadow economy accounts for 15-30 per cent of Lithuania’s GDP.

The shadow economy in Lithuania is contracting but it remains widespread. A third of people in Lithuania have friends or relatives who work in the shadow labour market and receive part of their wage or their entire wage «under the table» People in Lithuania tend to justify all forms of shadow economic activity. On average one in third see nothing wrong in working illegally or receiving part of the wage off the books or buying or selling smuggled cigarettes, alcohol, fuel or other underscored goods. People think that the main reason is quite simple and it is too high taxation.

These findings were produced in 2017 by representative population surveys conducted in six countries – Lithuania, Latvia, Estonia, Poland, Sweden and Belarus – by the Lithuanian Free Market Institute (LFMI) with international partner think tanks and experts.

To believe the survey, more than a quarter of the country‘s economy is believed to be in the shadow. It is the most common in the market for excisable goods: illegal alcohol constitutes 22 per cent of the strong alcohol market, illegal cigarettes – 20 per cent, and fuel – 15 per cent.

«In general, the shadow economy which still makes up around a quarter of the Lithuanian economy is shrinking largely due to economic growth and increasing income. However, there is a different tendency in the field of excise goods where illegal trade seems to be on the rise again,» said Vytautas Žukauskas, vice-president for research at LFMI.

According to polls, around 12-15 per cent of Lithuanians have purchased or consumed illegal alcohol or cigarettes from bootleg vendors.

According to a study completed by Arnis Sauka, associate professor at Latvia’s SSE Riga and researcher of the shadow markets in the Baltics, in 2017, in all three Baltic countries, under-reporting of salaries («envelope wages») was the largest component of the shadow economy, making up 45.5 per cent of the overall shadow economy in Latvia and 55 per cent and 41.7 per cent in Estonia and Lithuania, respectively. The average share of wages not reported by businesses to the state in 2017 is relatively similar in Latvia and Estonia (20.9 per cent and 18.1 per cent, respectively) and slightly less in Lithuania (15.2 per cent).


Leave a reply

Week in Lithuania. Lithuania to hold referendum on reducing number of MPs

A referendum on reducing the number of lawmakers to 121 from the existing 141 will be held on May 12 alongside the presidential election in Lithuania, the country's parliament has decided after 58 lawmakers voted in favour on Thursday, February 14, 42 were against and two abstained.

Latvian President: All should acknowledge constitutional values as their own

At the anniversary of the Constitution of the Republic of Latvia, President Raimonds Vējonis, urged everyone in Latvia «to acknowledge the values of the Constitution as one's own and be ready to stand for the basic law both in big issues and in aspects of daily life».

Court rules EUR 200 thousand bail for criminal suspect of Riga transport firm

A court in the Latvian capital has set at 200 000 euros the bail money for ex-board chairman of the Riga public transport company Rīgas satiksme, who is a suspect in the criminal case over possible corrupt procurement dealings at the municipal firm.

Grave terror attack shakes Kashmir, conflict region of India, Pakistan

A terror attack has taken place in the disputed region of Kashmir, a long source of argument between India and Pakistan, taking the lives of 44 people.

British parliament rejects government's approach to Brexit talks

As the government of the United Kingdom sought the backing of the British Parliament to its strategy for the remaining weeks of Brexit talks with the European Union, a motion endorsing the government's strategy was rejected with a majority of 45 votes.

Lithuanian lawmakers set to backtrack on «Norwegian-type» child welfare protection

The Lithuanian lawmakers have sent this week a mixed message on their resolve to root out child abuse in Lithuanian families. As the MPs backtracked from the stringent Norwegian-type child welfare protection law to a more lenient one, not-criminalizing corporal punishment in certain cases, some experts warn that the reverse can trigger a spike of child abuse cases.

Drivers warned in Latvia as roads slippery in warmer temperatures

Black frost is hampering driving on Latvia's main and regional roads. The road administration body Latvijas Valsts ceļi (LVC) says that maintenance teams are covering the roads with antiskid materials and advises drivers to be very careful.

Programmer, physiotherapist and pilot – top professions on Latvian Job Shadow Day

The Job Shadow Day 2019 was held on February 13 in Latvia and the professions of programmer, physiotherapist and pilot were the most attractive as 1 545 companies offered the chance to follow working specialists throughout the day, according to the data by Junior Achievement Latvia.

Macedonia starts name-change from signs to currency, passports

Macedonia's official gazette has published the name-change agreement, launching a campaign of renaming the country as North Macedonia and allowing for its accession to NATO and eventually the European Union.

Dozens of British ex-ambassadors call for delay of Brexit

A group of over 40 British ex-ambassadors have urged the country's Prime Minister Theresa May to delay the withdrawal of the United Kingdom from the European Union, British media report.

Port of Ventspils sees 40% boost in cargo turnover on year

Cargo turnover at the Freeport of Ventspils has in January 2019, compared to the respective month in 2018, jumped by 40.12% or 593 tonns, according to data from the Port Administration.

New CEO of Rail Baltic project is Finnish railway executive Riihimäki

To advance the pan-Baltic railway project, the Supervisory Board of RB Rail AS has appointed Timo Riihimäki as Chief Executive Officer and Chairperson of the Management Board of the Rail Baltica Joint Venture.

Latvian PM sees no chance no significantly raise teacher salaries in 2019

Despite promises to teachers made by the previous government, Latvia is currently unable to significantly raise the wages of teachers, because it would require either increasing the budget deficit or higher taxes, Latvian Prime Minister Krišjānis Kariņš has told on Wednesday, in an interview with LNT's programme 900 sekundes.

Estonian startups attract EUR 328 million in 2018

The Estonian startup sector has in 2018 attracted combined investments of 328 million euros with Taxify, Pipedirve and Monese being the top performers, according to calculations by Startup Estonia.

U.S. sees power vacuum in Eastern Europe as exploited by Russia, China

U.S Secretary of State Mike Pompeo evaluated that in Eastern Europe, China and Russia endanger the democratic and free-market gains made since the fall of the Berlin Wall in 1989 by the means of predatory investment and political meddling.

Ukraine peace agreement not fulfilled, UN finds

The Minsk peace accord of 2015 stands unimplemented in eastern Ukraine as over 3,300 people have been killed and 1.5 million people displaced in the five-year conflict, U.N. officials stated.

Latvian conductor Nelsons wins Grammies in U.S.

Latvian conductor Andris Nelsons has added two Grammy music awards to his list of honours for the work with the Boston Symphony Orchestra. At the Grammy music awards ceremony in the U.S. on Sunday, February 10, the Latvian won the prize for the best orchestral performance with the Boston Symphony Orchestra in the record Shostakovich: Symphonies Nos. 4&11.

Riga Mayor survives another no-confidence vote

The embattled Mayor Riga Nils Ušakovs has survived a vote of no-confidence as the opposition parties criticised him over corruption scandals involving the Riga City Council.

Justice Minister: Justice does exist in Latvia, but it's selective

«I'm in politics precisely, because as a citizen and a lawyer, I wasn't satisfied with the influence on the court and political system from people, operating outside these spheres. To my mind, this influence is the reason of long trials in Latvia. Another problem is the lack of specialists, who could solve economic crimes – if politicians would be very interested in this, many cases would have been solved over the past ten years. There are two options: there have either been unprofessional politicians, or they have been interested in having the situation remain the way it was,» said Latvian Justice Minister Jānis Bordāns in an interview with the BNN.

Spain starts historic trial against Catalan independence figures

Spain is beginning court proceedings against 12 leaders of the region of Catalonia for their role in the region's independence referendum and the subsequent declaration of separation from Spain.

Estonia convicts ex-army officer, his father for treason

A court in Tallinn has convicted ex-officer of the Estonian Defence Forces, Deniss Metsavas, his father for state treason, finding them guilty of selling state secrets to Russian intelligence.

Troubles continue in Latvian anti-establishment party KPV LV

In the Latvian anti-establishment party KPV LV, Saeima member Linda Liepiņa has decided to leave the post of the party's Co-chairperson and member of the board.

Thaw and warm temperatures expected in Latvia this week

The weather in Latvia, in the first part of the week will be mostly warm for winter-time and precipitation in the form of rain and wet snow can be expected, according to a weekly forecast from the Latvian Environment, Geology and Meteorology Centre.

Defence Minister: Deployment of allied missiles in Latvia is «dreaming»

The issue of the deployment of the missiles of allied forces in Latvia is far from being relevant, «it's dreaming», commented Latvian Defence Minister on Monday, February 11, in an interview with LTV's news programme Rīta panorāma

Hungary' s mothers of four to be exempt from paying income tax

In Hungary, the government is boosting financial support to families with several children, according to measures presented by Prime Minister Viktor Orbán. On Sunday, February 10, the significant measures announced by Viktor Orbán during an annual address, encouraging women to have more children.

Newest comments