Ramūnas Karbauskis, leader of the Lithuanian Farmers and Greens Union, Gediminas Kirkilas, chairman of the Lithuanian Social Democratic Labor Party, and Prime Minister Saulius Skvernelis on Tuesday registered compromise tax reform proposals.
“The deliberation of the tax reform by parliamentary committees has not been united. We’ve had discussions and seen various public opinions. But we all in fact agree with the government position on the key principles of the tax reform that the labor-related taxation should be the lowest in the Baltic states, the tax reform should be clearer and socially fairer. Therefore, the Seimas has no reason to stall the measures proposed by the government,” Karbauskis said in a statement.
According to Skvernelis, his government backs the reached compromise.
Under the plans, the personal income tax rate will be set at 20 percent, and the social insurance (SoDra) contribution rate will be 19.5 percent, instead of the initially proposed 18.5 percent.
The non-taxable income rate will be increased slightly faster and would reach 300 euros in 2019 and will subsequently rise by 100 euros every year, reaching 500 euros in 2021. The government originally proposed increasing it to 280 euros next year so that it reaches 470 euros in 2021.
Meanwhile, the rise of the non-taxable income application limit will grow more slowly and the 2.5 of the average monthly salary limit would be reached over the next three years, instead of next year, as the government initially proposed.
Under the new proposals, the social insurance contribution “ceiling” would remain (but it would not be applied to health insurance contributions) and the progressive rate of the personal income tax would be slightly higher, standing at 27 percent, instead of the initially proposed 25 percent.
The parliamentary Committees on Budget and Finance and Social Affairs and Labor have already opposed to the government-proposed social insurance contribution “ceiling”. The former’s chairman Stasys Jakeliūnas, representing the Lithuanian Farmers and Greens Union, told the Seimas on Tuesday he had registered his own proposal to refrain from the introduction of the SoDra contribution “ceiling” and a higher personal income tax rate for income exceeding it.
The government hopes the parliament will make up its mind on the tax overhaul by the end of the spring session for the changes to come into force in early 2019.