Analyst on tax reform: it's a scam and confiscation of a third of your assets - how it will happen

 

"When it comes to the proposed tax reform, the public’s attention is usually limited to higher taxes on real estate and people who earn a lot of money.

 

However, practically nothing is said about the fact that if the current model is adopted, everyone may have to pay huge amounts. For example, what will happen when you sell inherited real estate and a third of the amount will have to be paid to the state as personal income tax (GPM) on extremely high income.

 

About this in the show "Verslo požiūris" with Šarūnas Andriukaitis - Sutkus, risk analyst, and Gintaras Verbickaite, head of the "Vienaragiai LT" association.

 

"When talking about tax reform, we cannot look only at wages, because the changes will affect all income. After selling assets, successfully earned from investments, creating additional income from individual activities in addition to hired work, it is very easy to exceed the maximum taxable amount. The important thing is that income generation per year is assessed, but how long it took to generate that income is not assessed. For example, waiting for shares to rise in price. This will affect many more people than the 40 thousand that politicians are talking about," G. Verbickaitė argues and says that business is not against contributing to defense. The corporate tax rate for business was already increased by one percent in the fall, and it is planned to increase it further. No one objects to this. However, the general package of tax changes is causing discussions.

 

“Tax changes are important for business, because they are directly related to the best employees and managers. We will punish the most qualified people who have international experience. These changes will make Lithuania unattractive and uncompetitive,” says G. Verbickaitė and predicts that our country is the second largest in the EU in terms of population taxation. The tax burden on employees is already huge. It is also necessary to consider the fact that additional benefits, such as health insurance for employees, will also be taxed. Due to the taxation of individual activities, everyone will also feel the increase in the cost of services.

 

“The reform should be called what it is. It is a fraud and the confiscation of a third of your assets.

 

I can’t find another word. It is covered up under the guise of solidarity and defense, although penies will be shed for defense, and almost everyone will give up a third of their assets. One example is inherited real estate. Small and medium-sized businesses that do not use various tax avoidance schemes will suffer very badly. The richest thousand people will not feel it, because they have already put together the necessary schemes,” says Š. Andriukaitis-Sutkus.

 

The analyst also gives an example. A person created a small business in the region with an authorized capital of 100 thousand euros. Over fifteen years, he managed to accumulate a profit of 1.5 million euros and is selling the company for 3 million. According to the current scheme, income will be assessed as follows: 3 million minus 100 thousand euros, which is formally the acquisition value of the shares. Taxes 36 percent or a million euros.

 

“A normal question arises, why do I need it? Why invest and create value, if you can simply withdraw dividends and pay 15 percent.

 

Private owners will disappear from Lithuania, who will establish formal holdings somewhere in Luxembourg and thus avoid taxes,” explains Š. Andriukaitis-Sutkus and says that this is the problem, that no tax problems are being solved and all the loopholes are left. For example, farmers, real estate developers. Nothing changes for them. The same for investors with larger investment accounts when money is withdrawn.

 

“The taxation that has existed so far has not been ideal, but at least it was average in terms of size in the EU. In addition, when 15 percent is left for dividends, it will stop any investments, especially in regions where there are many owners who already want to sell the businesses they have created,” explains Š. Andriukaitis-Sutkus.

 

G. Verbickaite assures that experience shows that the higher the taxes, the more complicated they are, which only increases the shadow that Lithuania has already managed to reduce.

 

Š. Andriukaitis-Sutkus says that this will affect not only entrepreneurs, but also all people who create and inherit property.

 

The analyst says that we are a frontline state and we need to attract funds for the defense structure, which we will build with borrowed funds, and for servicing. Why should foreigners invest in us, who compete for workers in the global market, and here they cannot pay normally, offer shares, from which they can also earn money.

 

"People forget that our demographic situation is one of the worst in the EU, and now we want to take everything away from people who can create more, in order to divide it among who is not clear. We need to start tax reform from a different angle. At the beginning, we need to reduce the number of activities and equalize rates. They can be not only increased, but also reduced. Where is the logic that a person who is engaged in individual activity will pay 36 percent, and a business 29 percent? Especially since some activities are such that the law does not allow them to be converted into a company."