Continuing activities in the area of the profit tax, LFMI staged a press conference to propose ways how to reform one of the most harmful taxes in Lithuania, profit tax, by shifting to a single taxation of dividends. LFMI argued that this tax was one of the old taxes, the application of which had become inert and did not correspond to the current challenges. For these reasons, the application of this tax must be revised.
The flaws of the profit tax are systemic and cannot be solved by merely streamlining the tax base or changing the tax rate – the initiatives constantly contemplated by decision makers. A non-objective profit tax rate and complex and regressive procedures for computing the tax base are among the major defects.
At present, shareholders’ income is being tax twice: first, when income is earned at company level, and, second, when dividends are paid out. LFMI proposes to reform the profit tax by shifting to a single taxation of the profit tax, that is, taxing dividends paid out.
The profit tax is not the main source of budget revenues, accounting for negligible 9 percent of Lithuania’s national budget. Most importantly, LFMI believes, the money which would not be channelled to the budget would be reinvested by private companies into their own activity.