Government proposed tax changes too small to be called a reform – analysts

Žilvinas Šilėnas
DELFI / Domantas Pipas

“There are no fundamental changes. Perhaps things will be somewhat better for low earners, but this is not a long-term reform addressing Lithuania’s problems,” Žilvinas Šilėnas, president of the Lithuanian Free Market Institute, told BNS.

“On the other hand, I welcome the moderate approach. Given the hasty discussions on alcohol issues, I applaud the government for being moderate and not making hasty decisions. But let’s agree that these are minor changes, rather than a reform,” he said.

Tadas Povilauskas, the chief analyst at SEB Lithuania, said that he would describe the government’s proposals as “the tackling of the current problems and a certain cleansing (of the system)”.

“This is not a reform. These are proposals for improving the existing system. These are more technocratic proposals targeted at small-sized businesses and low-income people. For example, income distribution between labor and capital, a highly topical issue, remains unchanged. The tax burden on medium and higher earners, who contribute the bulk of personal income tax and social insurance revenue, basically is not lowered at all,” he told BNS.

“However, as far as I understand, the aim was to reduce social exclusion and income inequality. Then yes, this is being done,” he added.

Swedbank Lithuania’s chief economist Nerijus Mačiulis also said that the proposed changes would significantly reduce the tax burden on low-income people.

“This is a significant reduction of the tax burden, but, in the current form, it is only relevant to people with the lowest income. Therefore, in the future (the government should) look for possibilities to lower the burden on medium-income families as well,” he said in a comment to the media.

For the proposed tax system changes to take effect in early 2018, the Seimas should discuss and vote on them during the fall session in tandem with next year’s budget.

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