Stamp Duties Should Reflect the Costs of Services

The functioning stamp duty legislation provides that stamp duties are charged on the use of services rendered or legal documents issued by governmental agencies. The law delegates to the government the task of setting the rates of stamp duty and the rules of paying and remitting it. However, it sets no limits on how big stamp duties may be. The charging of stamp duties thus fails to serve its purpose of covering the costs of government-provided services. Unjustified tariffs have come to be used as tools for regulating the economy and curbing competitiveness. Stamp duties levied on the issue of business licences obstruct market entry and magnify the scope of informal activities, which are intended to help restore business profitability. In addition to that, the existing practice of setting stamp duties is at odds with the constitutional prerogative of the parliament to introduce taxes.
In early March, the LFMI developed a project of amendments to the stamp duty legislation. It proposes that the size of stamp duties does not exceed the costs of government-provided services. The proposal puts forward principles and rules of pricing services for which stamp duties are charged. The LFMI insists that the size of stamp duties should be based on labour expenses (directly related to the provision of a service or the issue of a document) and the costs of producing a document. Other expenses should be disregarded for several reasons. For one thing, they constitute a negligible share of all costs. Second, it is difficult to estimate the share of general expenses of government institutions in the costs of service provision. Finally, in light of the monopolistic and coercive nature of government-provided services, the aim should be to prevent potential abuse intended to augment the size of stamp duties.
The LFMI’s project of amendments proposes new rules of calculating and paying stamp duties. The revenue obtained from stamp duties should go toward financing the institutions which provide the services. Stamp duties should be paid directly to the accounts of the institutions concerned. In order to account for all government revenues and expenditures, however, the receipts from stamp duties should be reflected in the state (municipal) budget. Governmental agencies should be allowed to collect stamp duties by selling stamps or issuing forms. Seeking the uniformity of taxes, the right to exempt from stamp duties exercised by the government and municipalities should be forfeit. The costs of providing services or issuing documents would otherwise have to be covered with other taxes.
Stamp duties should not be indexed for inflation on the point that changes in the general level of prices fail to reflect changes in the actual costs that stamp duties are supposed to cover. Stamp duties should tally with the actual costs of providing services, but for the sake of stability of taxes, tariffs could be established once a year.
(In March 1998, the LFMI’s proposal was submitted to the government and ministries. Rūta Vainienė, LFMI’s Senior Policy Analyst, presented it to the expert commission and the Council of the Lithuanian Industrialists Confederation (LIC). The project received unanimous approval from the LIC and ministries. It was highlighted in the February 26 Litas and March 9 Respublika. The Economic Ministry is now preparing a formal submission of the proposed amendments, a prospect likely to spur a policy action aimed at redesigning stamp duty regulations).