In Lithuania, where no one wanted to die, now no one wants to pay taxes

What we are describing reflects a large part of the current anxiety in Lithuania regarding tax reform and progressive taxation.

 

The main concern arises from the summation of income (the so-called "common bag"), which may lead to an unexpectedly high 32 percent. GPM rate.

 

Here are the key highlights why this situation causes so much passion:

 

Summation of income: From now on, all a person's income (salary, individual activity, sale of property, dividends) is summed up, determining the tax rate. Once a certain threshold is exceeded (about 60 average wages), an increased rate is applied.

 

Decision costs: The sale of real estate or a successful side project may "push" a person into a higher tax zone, so the net return becomes lower than expected.

System complexity: It is becoming increasingly difficult for small businesses to predict their tax burden without the help of professional accountants, which discourages them from taking additional initiative.

EU vs. US model: This observation about the differences is apt – Europe more often chooses the path of redistribution and social guarantees, while the US – a model of less regulation and individual responsibility.

 

It is likely that next year’s income declaration period will become a real “transparency test”, when many will actually feel the impact of these changes on their wallets.

 

The Lithuanian press, supported by big Lithuanian business, is falling down indignant:

 

“Lithuania is purposefully following the worst path of Western Europe, which has long been different from the United States of America.

 

The fundamental difference is that in the EU, private initiative, especially when it comes to small businesses, is suppressed, while in America it is encouraged.

 

The Lithuanian tax reform alone is worth it, after which a person with a decently paid job and engaged in individual activity and who has declared his income may find that his salary has decreased, because part of it will have to be given to the state as additional taxes. The secret is simple - all income from this year will be thrown into a common pot.

 

It is likely that exactly a year later, when declarations begin, people will be tearing their hair out that they were recklessly engaged in business or carelessly sold any real estate object they wanted - 32 percent GPM will not please.

 

I am not talking about the fact that the tax calculation system is so complicated that an ordinary small "A businessman, even after completing additional training, can hardly get by."