We would like to share with you the results of a survey of public awareness and attitudes towards LFMI, conducted in April. We are happy that Lithuanian people know the Institute, see our activities, hear our proposals and agree with them. People trust LFMI as a professional and independent institution and, compared to other institutions in Lithuania, we rank considerably high. We are grateful to all those who contributed to this evaluation which is an inspiration and at the same time a commitment for us.
What issues did we analyse in May? Since politicians keep on repeating that Lithuanian people want progressive taxes which they believe are fair, we asked people themselves whether progressive taxation should be applied to their own income. It appeared that only few would crave for such “fairness” for themselves: as much as 68 percent of those polled are unwilling and would not agree to pay progressive taxes.
The tax burden that every Lithuanian is forced to lift is already too heavy – we work to pay taxes a total of 124 days. LFMI has been calculating the Tax Freedom Day in Lithuania since 1993: this year it fell on May 5 but the government is living in debt for 32 days more, so if we needed to pay the total bill for the public sector’s work in 2011, we would celebrate the Tax Freedom Day as late as on June 7.
In May, we completed the second year of our largest educational project “Studying Economics Actively.” Since October last year, upper-grade pupils have been studying economics online. They analysed 10 economic topics, solved tasks, communicated with their lectors and guests of the project via the Internet. The most talented and active participants were invited to a closing camp on May 12-13 where they took part in team tasks, listened to lectures, had a meeting with an entrepreneur, tried their public speech skills, met new friends and had a good time.
Other activities are presented below.
Yours sincerely,
Rūta Vainienė
President, LFMI
TAXATION AND BUDGETS Sixty-eight percent of Lithuanians are Unwilling to Pay Progressive Taxes
17-05-2011
A survey, initiated by LFMI and conducted by Spinter Tyrimai, revealed that the absolute majority of Lithuanian people would not agree, if progressive taxes were imposed on their income. This survey and its findings differ from other opinion polls carried out: we asked people about what taxation should be applied to their income – not their opinion about progressive taxes as such. According to LFMI’s Policy Analyst K.Leontjeva, decision makers declare that progressive taxes are fair and that people want them to be introduced; however, only few people wish such “fairness” for themselves. Progressive taxes are popular only to the extent to which people think that somebody else, not them, would be paying these taxes.
The Lithuanian Radio broadcast a commentary by R. Vainienė on this topic, “What Taxes People Want?”. A commentary by V. Žukauskas on how progressive taxes would affect the country‘s competitiveness and attractiveness to foreign investments (“Striving for Competitiveness – not only in Words, but also in Deeds”) was posted at Delfi.lt.
Free from taxes on May 5, government will live in debt for 32 days more
03-05-2011
The Tax Freedom Day is a symbolic day in the year when the average income earner stops handing over all his income to the government and begins to make money for his own and his family’s welfare. The Tax Freedom Day fell on May 5 this year. If people worked the first half of the year to pay taxes, each litas earned during the first 124 days would be channelled to the budget. When government is borrowing at an intensive pace and budgets face permanent shortages, there is sense to calculate a Freedom from Government Spending Day which incorporates the future tax burden. If people were to pay the total public sector bill in 2011, the Tax Freedom Day would come much later in the calendar – June 7. The press release issued by LFMI contains data about how many days in a year we work to pay specific taxes and to maintain the public sector, plus information about Tax Freedom Days in other countries. A commentary by LFMI‘s Policy Analyst K. Leontjeva “Overborrowed Freedom from Taxes” was posted at Delfi.lt. LFMI also prepared and circulated the most frequently asked questions about the Tax Freedom Day.
ECONOMIC REFORMS
Dismal ‘Thank you’ to Lukashenka for an Economic Lesson
31-05-2011
The Lithuanian Radio Broadcast a commentary by LFMI’s President R. Vainienė on the devaluation of the Belarusian rubble and the financial turmoil in the country, plus on the currency board system that has been in operation in Lithuania for more than 17 years, serving as an anchor of monetary stability and shielding the country from what is currently happening in Belarus.
Guidelines for social security reform – a step towards the Danish model
30-05-2011
In a commentary printed in business daily Verslo Žinios, LFMI’s Policy Analyst K. Leontjeva reminds readers that discussions on how to calculate pensions should focus on changing the model itself, rather than the formula of pension calculation. The policy analyst welcomes the decision to pay the basic pension not from “Sodra” but from the state budget, which will be the first step towards the introduction of the Danish pension model. The author highlights this model’s advantages, stating that the Lithuanian Government should be consistent in implementing the measures chosen, so that the “Sodra” reform would aim at the system’s most acute defects and that all future pensioners were able to enjoy its results.
Streamlining the Regulation of Pharmacy Activities – a Means to Cut Down Pharmaceutical Prices
16-05-2011
Seeking to build sustainable, positive-effects preconditions for reducing pharmaceutical prices, we made and submitted to relevant institutions a case study “Streamlining the Regulation of Pharmacy Activities – a Means to Cut down Pharmaceutical Prices.” The goal of the study was to identify specific regulations of pharmacies and their activity that increase the costs of pharmacy activities. LFMI concluded that eliminating redundant, unjustified regulations of pharmacy activities would allow reducing pharmaceutical prices that shot up as a result of recent price controls. In addition, it would allow creating more solid and economically grounded preconditions for reducing pharmaceutical prices. The study contains concrete provisions, the removal or revision of which would eliminate unjustified regulations in the retail trade in pharmaceuticals.
BUSINESS DEREGULATION
Regulative burden
A total of 90 percent of Lithuanians say that advertising doesn’t encourage them to consume more alcohol
30-05-2011
In April, company Spinter Tyrimai conducted an LFMI-initiated representative sociological survey that aimed at elucidating how people themselves evaluate the impact of alcohol advertising on their drinking behaviour. According to the survey, alcohol advertising doesn’t have any effect on alcohol consumption of nearly 60 percent of respondents. Over 20 percent of respondents reported that advertising provides more information, facilitating their choice, and nearly 10 percent said that alcohol advertising adds variety to advertising breaks. Only 11 percent of those polled responded that advertising encourages their alcohol consumption. LFMI proposed to reject absolute prohibition of alcohol advertising to be in effect as of the next year since the existing restrictions on alcohol advertising are already strict and sufficient.
On June 1, LFMI submitted to relevant institutions its position on absolute prohibition of alcohol advertising, recommending adopting amendments to a draft law on alcohol control that envisages a withdrawal of absolute prohibition of alcohol advertising from 2012. The analytical material contains LFMI’s arguments regarding the consequences of absolute prohibition of alcohol advertising.
“The Shadow” is the Shortest, but the Methodology Raises Doubts
25-05-2011
In a commentary published by daily Verslo Žinios, LFMI’s Policy Analyst Vytautas Žukauskas analyses a survey carried out by the Stockholm School of Economics in Riga (SSE Riga) which found that the shadow economy in Lithuania accounted for 18.8% of GDP last year and was the smallest in the Baltic countries. According to the policy analyst, the academics from SSE Riga measured the scope of the shadow economy polling only legally operating businesses and excluding illicit goods (e.g. smuggling) and services from their indices. The LFMI’s expert is also surprised by a significant gap between the underground economy in Latvia and Lithuania because the business environment is seen as unfavourable in both countries and because the economic crisis has shaken their economies more considerably than Estonia.
Government vs Man: As you Sow, you shall Reap
03-05-2011
In a commentary broadcast on the Lithuanian Radio, LFMI’s President R. Vainienė states that seeking to eradicate illegal work and “envelope” wages and searching for ways to combat smuggling and other forms of illicit activity, the government has been imposing more regulations, taxes and penalties, forgetting, however, that a country’s economic problems can be effectively solved only via eliminating the roots of those problems. An individual who wants to buy cheaper fuel, to receive a higher salary and who refuses social guaranties has become a criminal. Man has become bad to government because government has done bad things to man. And the more government is ruthless to man, the stronger will be man’s response to government. It would be much more useful if government repealed its own decisions that have given rise to the problems.
Energetics
Prohibition of concessions in the heating sector will restrict investments and create unfavourable, discriminatory conditions for activity
18-05-2011
LFMI submitted comments to responsible policy makers on draft amendments to the Law on Concessions that aim at “blocking the way for monopolies to manage the heating sector.” The proposed means to this end is to prohibit municipalities to transfer the management of the heating sector, or a certain part of it, to another economic agent. If enacted, this amendment would prohibit concessions in central heating supply (CHS). We proposed the authorities to reject the draft law as prohibition of concessions would drastically restrict investments, building unfavourable and discriminatory conditions of activity. Private capital in CHS companies should be treated as a necessity, not as an exception. Shortcomings of the agreements of individual concessions must not be seen as a motive for prohibiting concession in the CHS sector in general. Proper elimination or restriction of monopoly relations in the CHS sector is possible via consistent changes to the legal basis – not via imposing restrictions on investors or owners – so that different ways of heating supply were not prohibited. The only appropriate alternative for concessions in the CHS sector is privatisation of CHS enterprises, preceded by certain modifications of the legal basis without creating conditions similar to monopoly.
EU’s proper move to help both consumers and the industry would be to reduce, not increase taxes on energy
16-05-2011
In its response to the European Commission proposal to overhaul energy taxation rules, LFMI states that EC’s proposals fail to take into account the essential fact that the Directive recommends increasing taxes on energy products at the time when global oil prices are high and yet rising. Soaring energy prices are already encouraging lesser consumption of energy products, which, respectively, drives down CO2 emissions. Increased taxation on energy products would redouble a heavy burden of high oil prices for individual and industrial users, plus diminishing the consumption of goods and services. EU’s proper move would be to reduce, not increase energy taxation. This would help consumers to bear a growing burden of their expenses, while the EU would be able to recover and enhance its competitiveness. Business daily Verslo Žinios published a commentary by LFMI’s Senior Policy Analyst Ž. Šilėnas “Taxes on Energy: Why Equalisation Turns into Increase”.
Changes of the Civil Code will not solve problems, instead creating restrictions of economic activity
11-05-2011
LFMI submitted its comments to relevant institutions on draft amendments to the Civil Code (XIP-2917) that cover the following provisions: restrictions on the administrator of common partial ownership of owners of flats and other premises, the obligation to provide to the public the information about the administrators activities (costs, prices, agreements, terms of service provision, etc.) and the procedure for the administrator’s appointment. We proposed to not approve the draft since it might inhibit foreign investments and undercut competition in the administration market. The regulation proposed in the bill will not ensure lower prices for consumers.
05-05-2011
In our response to the European Commission, we stated that permit granting procedures may be a significant drag on investments, therefore the EU’s moves to hasten the process of permit granting would be welcome. We also reminded that permit granting must be based on general principles of purpose, neutrality, rationality, effectiveness and others.
LFMI‘S PARTICIPATION IN THE SUNSET COMMISSION
LFMI‘s President Rūta Vainienė continued her active participation in Sunset Commission to reduce bureaucracy.
ECONOMIC EDUCATION
The most talented participants of LFMI’s online courses on economics in a closing camp
19-05-2011
LFMI completed the second year of its project “Studying Economics Actively” which was crowned by a summer camp. in mid-May, the most gifted and active participants of the online courses on economics spent several days at a cottage in Aukštadvaris where they solved team tasks, listened to lectures, met with a business leader, tested their public speaking skills, found new friends and had a good time. At the camp, Mindaugas Lapinskas, founder and head of strategic marketing company
Brandscape and owner of company
Puikis, spoke about his road to business and the challenges he met. LFMI’s Senior Policy Analyst and lecturer of “Studying Economics Actively” Žilvinas Šilėnas demonstrated and discussed the popular movie “South Park.” Together with the pupils, he also ascertained what impressions about market participants (the buyers and the sellers) the society has and if they are grounded. More impressions from the camp can be found
here. In the next school year, LFMI will again invite upper-grade pupils to learn economics online at no cost.
18-05-2011
03-05-2011
LFMI’S BLOG
Six Fundamental Errors of the Current Orthodoxy
18-05-2011
