bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Monday 16.12.2019 | Name days: Alvīne
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

State company may take over Ventspils Freeport authority’s duties before year’s end

The newly-formed state company may take over the duties of Ventspils Freeport authority before the end of the year, says Latvia’s Transport Minister Tālis Linkaits.

Victims of New Zealand eruption remembered with moment of silence

In New Zealand, a minute of silence has been held to remember the 16 people, who lost their lives in a volcano eruption on an island popular among tourists.

Week in Lithuania: Conscription age lowered, Klaipėda port’s development plan approved, retail tax delayed

Last week, in Lithuania, the key news stories were the lowering of the national conscription age, the approval of the development plan of the Klaipėda port and the delay of the real estate tax.

BNN summary of the week: end of Lembergs Era? New governor for Bank of Latvia; fight for Riga City Council

The overthrowing of the «old league» in Latvia has caused a domino effect. The most notable event to have taken place this week is the addition of Aivars Lembergs and four of the associations he has influence over to the list of sanctioned persons USA. This has shaken up the established order in Ventspils and Latvia.

Aivars Lembergs leaves his post in Latvian Olympic Committee

On Friday, 13 December, individual member of Latvian Olympic Committee and member of its Executive Committee Aivars Lembergs announced to LOK board his decision to leave the organization, BNN was told by LOK press-secretary Mārtiņš Mālmeisters.

Ralfs Kļaviņš and Edvīns Bērziņš leave the board of Latvian Transit Business Association

Chairman of Riga Commercial Port Ralfs Kļaviņš and ex-chairman of Latvian Railway Edvīns Bērziņš have left the board of Latvian Transit Business Association, according to information from Firmas.lv.

US sanctions will not affect companies in which Lembergs no longer has any influence

The sanctions introduced by USA against Lembergs will not affect the companies over which he no longer has control thanks to a ruling of the court.

Liquidation of discount fares on multiple RMS routes would help save money for Rīgas satiksme

By liquidating multiple discounts for passenger fares on multiple LLC Rīgas mikroautobusu satiksme routes, LLC Rīgas satiksme public transport company hopes to save approximately EUR 1.75 million a year.

Tallinn region GDP portion decreases in Estonian economy

In 2018, 65% of the Estonian gross value added was created in Harju county, while the rest of the country is inching closed with Harju county, the official statistics of the Baltic country showed.

EU prolongs targeted sanctions against Russia over Ukraine

The European Union has extended for another six months its sanctions against Russia’s energy, finance and military sectors. The continued restrictive measures are said to remain in full until Minsk peace deal is implemented.

Local government representatives will no longer work at Riga and Ventspils freeport

Following the coming into force of amendments to the Law on Ports, representatives of Riga City Council and Ventspils City Council will lose their respective posts in the board of Riga Freeport and Ventspils Freeport, the law states.

Total tax debts in Latvia at December’s beginning – EUR 869.4 million

At the beginning of December, total tax debts in Latvia, including outstanding, halted and extended debts, were equal to EUR 869.367 million, which is 1.9% less than a month prior, according to data from the State Revenue Service.

In UK’s Brexit election, Conservatives win comfortable majority

In the British snap parliamentary election aimed at breaking the Brexit impasse, the ruling Conservative Party has won gaining a comfortable majority, according to close to complete results.

Riga City Council’s interim administration may be entrusted to VARAM state secretary Balševics

If the Saeima votes in favour of dismissing Riga City Council, the interim municipal administration may be entrusted to Environment Protection and Regional Ministry’s state secretary Edvīns Balševics, according to the ministry’s Riga City Council dismissal legislative draft to be decided on by the government on 17 December.

EU member states commit to 2050 carbon neutrality, Poland opts out

European Union’s 26 members, including the Baltic states, have supported the planned political course to considerably reduce the greenhouse gas emissions to net-zero by 2050. Coal-powered Poland said it could not reach the goal and opted out.

Latvia’s prime minister forms a work group to ensure Ventspils Freeport’s operations

On Thursday, 12 December, Latvia’s Prime Minister Krišjānis Kariņš has issued an order on formation of a work group under Transport Minister Tālis Linkaits in order to ensure undisrupted operations at Ventspils Freeport, as reported by the prime minister’s press-secretary Sandris Sabajevs.

Ministry: to prevent damaging Latvian sports sector’s reputation, Lembergs should leave LOK

To avoid letting US sanctions negatively affect Latvian Olympic Committee and spread to the reputation of the country’s sports sector, the ministry can only ask Aivars Lembergs step down as member of LOK Executive Committee, BNN was told by Education and Science Ministry.

Budget Committee declines residents’ request to postpone increasing funding for parties

Saeima’s Budget and Finance Committee has rejected a public initiative signed by more than 11 000 residents. This initiative requested postponing the planned increase of funding for political parties.

Lower election threshold in Lithuania – more democracy or chaos?

The Lithuanian legislature, Seimas, has lowered this week the parliamentary election threshold to 3 per cent for political parties and 5 per cent for coalitions.

Russia expels German diplomats, retaliating to German step over Berlin murder

Russia has asked two diplomats of the German Embassy to leave the country. This is a tit-for-tat measure after Germany declared two Russian diplomats personae non grata as Berlin investigates an international murder in the German capital, TASS reported.

Riga Freeport and Liepaja Special Economic Zone to leave LTAB

Riga Freeport and Liepaja Special Economic Zone will leave Latvian Transit Business Association managed by Aivars Lembergs, as both are subjected to US sanctions.

Lembergs’ influence over Ventspils Freeport needs to end, bank supervisors say

The goal of the US sanctions is reducing Aivars Lembergs’ economic and political influence over Ventspils Freeport and other companies under his control. Sanctions are not meant to paralyse companies, rather seeing how they are used to process deals influenced by the person under sanctions – Aivars Lembergs, said Finance and Capital Market Commission head Santa Purgaile during a press-conference on Thursday, 12 December.

USD 25 million offered in Weinstein sage to 30 alleged sexual abuse victims

In the U.S. movie industry scandal surrounding sexual abuse claims against film producer Harvey Weinstein his lawyers have offered a USD 25-million settlement to more than 30 women, The Guardian reports.

Legal Affairs Committee supports lifting judge immunity for administrative violation cases

Saeima’s Legal Affairs Committee supported prior to the second reading legislative drafts to the Law on Judicial Power and Law on Judges Disciplinary Liability intended to lift the immunity of judges in administrative violation cases, as confirmed by Justice Ministry.

Estonian-Finnish gas interconnection unveiled

Estonia and Finland have held ceremonies to unveil the gas pipeline Balticconnector, built to connect the gas transmission networks of both countries separated by the Baltic Sea.


Do NOT follow this link or you will be banned from the site!