Citizens evaluated the planned tax reform

Government program plans to move the taxes that are paid by the employers’ and merge them with the employees.

The Government promised to tell how they were going to do that by the beginning of the summer. However, it seems that many citizens disagree or don’t understand these plans.

One of the most important things, which Saulius Skvernelis Government has promised to do is a tax reform. At the moment the taxes and social security contributions that are being paid by the employers are planned to move and merge with the part of the employee’s tax.

By doing this the employee’s gross (on paper) salary would increase and it would be the same as whole cost of the workplace. However, the net salary “to the hands” would remain the same for most because the tax rates would increase.

However, the Government promised that these changes would benefit for those that earn the least, it would supposedly create space to increase the non-taxable income, so in the end these people would get more money.

DELFI commissioned a survey from the company “Sprinter research” who conducted at the end of April and interviewed more than a thousand people from 18 to 75 years. They were asked whether they approve the planned tax changes and if they know what their salary „on paper” is and how much their job costs for the employer.

It turned out that only 24 per cent of the population support the Government’s plans, 44 per cent opposed and another 31 per cent don’t know about it or didn’t answer. More men aged 36-55 with a higher education would agree with this position.

Almost 47 per cent of people know what their salary “on paper” is, 43 per cent know approximately, but about a tenth don’t know that. The results were roughly equal on the knowledge about taxes and fees that employers pay. These questions answered positively mostly by women and people with a higher education.

Radishes or a “paper” salary?

When commenting on the survey results director of “Sprinter research” Ignas Zokas wondered that a small part of the population opposes the planned tax changes because they lack clarity.

“Some things would appear, I myself should pay more taxes or something, but there’s no clarity. Why should I have additional bureaucracy and trouble when now the company takes care of everything, especially if the salary won’t change? I think that’s a simple understanding.

For instance ff I am an employee, I get a salary, taxes and fees are paid by the company, who takes care of the books. Now, suddenly I would get more money and then I would have to push it around, and feel an obligation as a responsible person: it’s just more trouble without the benefit” said I. Zokas.

He considered that perhaps there not enough of communication on what is the benefit for the people from the changes. Similarly, the Director interpreted the fact that many people don’t know or just “estimate” what is their salary “on paper” and especially how much their job costs for the employer.

“The knowing or not knowing doesn’t affect their quality of life. Apparently, the information about which type of radishes will give more harvest is more useful than information on how much does he earn “on paper”.

They say not to reinvent the wheel

Teodoras Medaiskis, Vilnius University professor, pointed out that people don’t understand or don’t know why a tax reform is necessary.

“This is why it lacks support in the public. I can’t say that such it would be supported by a lot of specialists. I do not know any social security with the country (EU or OECD members), where the employer’s social security contribution is zero.

They say that the transfer of social security to the employee should reduce the shadow (economy). But will it? Will greater gap between the amounts “on paper” and “in the hands” won’t in be the opposite?

I’ll agree with the employer: pay me at least a part of what you previously gave to “Sodra” but don’t show it in the books and don’t take away taxes and payments from me. I do not see a serious barrier for “envelope” behaviour” said the scientist.

In the opinion of T. Medaiskis we shouldn’t be reinventing the wheel. Most countries divide the social insurance contributions between the employer and employee by roughly a half and there are no problems:

“Let’s do the same in Lithuania because the most of the payment falls onto the shoulders of the employer. The employee, if he wants, will always be able to find out how much does he cost to the employer. I think that in most jobs electronic payment slips, which show everything: from the price to the employer to after-tax size, are available for the employee and if not: they should be made mandatory.

Chief adviser at “Sodra” Julita Varanauskienė thought that the survey results lead to the thought that people don’t know much about the country’s tax and social security system.

“We can think that the knowledge is scarce, not just the laws but also about their own benefits: people can’t remember what (sickness, unemployment, maternity benefits) and how much they received.

Perhaps the information on payments and for the benefits, especially individual one, personal there’s a lack of. Perhaps it would strengthen the faith, confidence and participation in the country’s tax and social security system” she considered.

Promises more information soon

When asked to comment on the survey results, Raminta Stanaitytė-Česnulienė, who is a the financial advisor to the Minister, promised more information on upcoming changes will be released soon:

“All the tax proposals will be communicated widely to the public after they are delivered to the Government. We will invite the public to actively participate in various groups, to take part in discussions and express their views. The final decision will made by the Parliament in the autumn session together with the presentation of the budget. All opinions are important, interesting and all proposals will be presented not as fact but for a discussion to hear everyone out.”

According to the advisor, it’s difficult to say why the people opposed the tax reform, “perhaps one of the reasons is that they didn’t get enough information. So, this will be the next step: listening and explaining the information.

The advisor of the Minister of Social Security and Labour Romas Lazutka evaluate that it’s good that the population at least approximately know what their salary is “on paper”. On the other hand, half of the respondents don’t know how much does it cost for the employer, maybe they’re not interested and think that it’s not affected by them.

When commenting on why so few people agree with the planned changes, he thought that maybe there is a fear that it’s going to cost us.

“However, the key question would have been do you trust that the nominal wage will be increased adequately. Maybe not everyone would understand it but there could be a controlled question before to select who do or don’t understand.

Overall, these survey have theoretical basis, why they’re asking and what the results will be isn’t meaningful. Then you have to guess as to why the most reliable are fire fighters, whom are not needed by most over the whole lifetime. And it’s hard to interpret” he summed up.

Public opinion and market research company “Sprinter Research” conducted a survey on public opinion 2017 April 19-26, by the order of DELFI.

The study included people from 18 to 75 years old. It was conducted through standardized interviews. The research took place in the whole territory of Lithuania, 65 points in total that were set to represent the entire country.

The study had 1005 respondents, who are in proportional distribution of the population of the country. The research results may have an error of 3.1 per cent.