bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Wednesday 24.04.2019 | Name days: Nameda, Visvaldis, Ritvaldis
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

Latvia’s State Revenue Service to promote voluntary payments of taxes

The new strategy of Latvia’s State Revenue Service for the next three years should be based on promotion of voluntary payment of taxes, not the increase of penalties, SRS director general Ieva Jaunzeme told journalists after a think tank organized for the creation of a new strategy.

Medicines for people with mental disorders to become more accessible in Latvia

To improve accessibility of medicines for people suffering from psychological and behavioural disorders, Latvia’s government decided to expand the list of diagnoses eligible for state-compensated medicines on Tuesday, 23 April.

Belarus halts exports of low quality oil products to Baltics, other neighbours

Belarusian Oil Company has announced the temporary suspension of light oil products to the Baltic states, Poland and Ukraine explaining that low-quality oil products have been supplied by Russia to Belarusian refineries.

Producer prices in Latvia: increase of 4.1% in March

Compared to March 2018, average level of producer prices in Latvian industry increased by 4.1 % in March 2019. The level of prices of products sold on the domestic market rose by 6.5 % and that of exported products – by 1.9 %.

Saeima deputy confident on the need to dismiss National Mass Media Council

Considering recent development, the National Electronic Mass Media Council should be dismissed, says head of Saeima’s Human Rights and Public Affairs Committee Artuss Kaimiņš.

Estonian President continues to meet with ministerial candidates

As outgoing Estonian Prime Minister Jüri Ratas' is likely to form his second government with the controversial Conservative People's Party of Estonia and the national-conservative Pro Patria, Estonian President is meeting with his ministerial candidates.

Teachers demand from Latvia’s ministry specific amendments to regulations

Latvian Trade Union of Education and Science Employees sent a letter to Latvia’s Education and Science Ministry on Tuesday, 23 April. In it, representatives demand strict guarantees and specific amendments to regulations to ensure increase of wages for teachers in accordance with the schedule.

Catalonia – key issue in Spanish pre-election debate

As Spain nears its early general election on Sunday, April 28, its outgoing Prime Minister faced criticism from his opponents over Catalonia's secession crisis.

Latvian minister orders closure of Deglava Bridge in Riga

Latvia’s Interior Affairs Minister Sandis Ģirģens has ordered State Police to close down Deglava Bridge starting with Thursday, 25 April.

Sri Lanka death toll rises. Authorities had been warned about possible attacks

In Sri Lanka, the number of people killed in attacks on churches and hotels has reached 290 people, while it has been revealed that national authorities had been warned about possible attacks.

Road construction company Binders to attract workers from Ukraine and Belarus

Latvian road construction company SIA Binders experiences a shortage of workers. Because of that, the company plans to attract guest workers from Ukraine and Belarys, says Bindars board chairman Aigars Sēja.

Ukrainian presidential election won by Zelensky on hopes of change

The run-off of the Ukrainian presidential election has been won by comedian Volodymyr Zelensky, who has promised change and better relations with Russia.

Air temperature to reach +23° C in Latvia this week

Dry weather will remain in most of Latvia this week. The sun will shine often and there will be slow eastern and south-eastern wind. However, strong wind is expected to come on Wednesday, 24 April, and precipitation is expected at the end of the week.

Forevers: 615 tonnes of grilled meat was consumed in Latvia last year

615 tonnes of meat products for grilling was sold in Latvia in 2018, according to sales data from meat processing company Forevers.

Every day hens in Latvia produce an egg for every resident

The number of laying hens in Latvia, when compared to 2017, had increased 19.2% in 2018, reaching 3 million, according to data from the Central Statistical Bureau of Latvia. Compared to the previous year, the total number of domestic birds has increased 9.3%, reaching 5.4 million, which is the largest index since 1992.

73% of residents believe they benefit from Latvia’s membership in EU

Approximately 73% of residents believe Latvia benefits from membership in the European Union. Interviewed residents mainly outline job opportunities, economic growth and security, according to the latest data compiled by Eurobarometer.

General government budget deficit in Latvia reached EUR 295.4 million last year

In 2018 general government budget deficit accounted for EUR 295.4 million or 1 % of the Gross Domestic Product and general government consolidated gross debt amounted to EUR 10.6 billion or 35.9 % of the GDP.

Egils Levits optimistic about his chances becoming Latvia’s president

Presidential candidate and European Court of Justice Judge Egils Levits is optimistic about his chances of becoming Latvia’s next president.

Estonia’s government to be formed by standing Prime Minister Jüri Ratas

On Thursday, 17 April, Estonia’s parliament entrusted formation of the country’s government to Centre Party’s chairman and standing Prime Minister Jüri Ratas.

At least 29 die as German tourist bus runs off road in Portugal

At least 29 people were killed and 27 were injured when a German tourist bus ran off the road on Madeira Island in Portugal, as reported by BBC.

EY: businessmen show very positive outlook towards global economy

The latest Ernst&Young EY Global Capital Confidence Barometer reveals a generally optimistic outlook businessmen have around the world – 93% of interviewed company CEOs believe the economic situation in the world is steadily improving. The same opinion was voiced by 73% of interviewed CEOs last year.

Orkla Latvija signs contract for construction of Laima manufacturing plant in Ādaži

On Wednesday, 17 April, Orkla Latvia signed a contract worth EUR 8.9 million with construction company Merks on the construction of a Laima manufacturing plant in Ādaži, BNN was told by Orkla Latvija representative Lineta Mikša.

As police arrive, Peru’s ex-president commits suicide

Ex-president of Peru Alan García committed suicide on Wednesday, 17 April, when police arrived to arrest him for corruption.

Estonia’s president to meet with Putin; the two will discuss Baltic security

On Thursday, 18 April, Russia’s President Vladimir Putin will meet with Estonia’s President Kersti Kaljulaid, as reported by Estonian public media ERR.

Europe’s borders to be reinforced – a specialist corps to be formed by 2027

On Wednesday, 17 April, the European Parliament approved a new law to strengthen Europe’s border and coast guard, as reported by EP representative in Latvia Signe Znotiņa-Znota.

Most read

Most commented