2024-04-08 07:41:46
“Some political parties are proposing to increase corporate tax more, which is a popular idea among some voters. But income from corporate tax is very unstable. Especially when there is a tougher cycle for business, there may be no profit left. I’m not talking about the fact that some companies can optimize taxes and pay them outside of Lithuania,” N. Mačiulis said to “Žinių radio” on Monday.
The economist claims that the easiest way to create sustainable financing for defense is to eliminate tax incentives. However, according to him, last year’s discussions on tax reform showed that such decisions are not popular.
“Probably the right way is to eliminate tax incentives. But we saw how unsuccessfully it was implemented last year. One of the reasons why tax reform did not gain support was because there was no interest in seeing it happen. Maybe if we said that thanks to this reform we could increase defense funding to 3 or 4 percent. from GDP, it would be more difficult to counter the arguments for the elimination of benefits,” he explained.
However, N. Mačiulis mentions that the easiest way to finance defense remains the increase of value added tax (VAT) and profit tax by 1 percent.
“Business communities and associations agree that this would be the distribution of 1 percent. VAT and 1 percent by increasing the profit tax. This is probably the simplest way without looking for a compromise, why destroy those tax benefits”, said N. Mačiulis.
The government should not be afraid to borrow for defense
As Lithuania has the smallest debt in the European Union, the government should not be afraid to borrow for defense financing, says N. Mačiulis.
“If we are talking about what we need here and now, having already agreed that there are some measures with the help of which we could greatly increase Lithuania’s security, then borrowing is probably one of the best instruments,” said the economist.
“As soon as the public finances of the government sector were announced last week, the budget deficit was much lower than predicted and planned, the state debt was 38 percent. of the gross domestic product, twice lower than the average of the European Union”, explained N. Mačiulis.
According to him, Lithuania would not have to comply with the European Union’s soon-to-enter fiscal discipline rules, which do not allow exceeding 3 percent of the GDP budget deficit, if there was a clear decision as to where exactly these additional funds are needed in the national defense system.
“The European Commission might say that it is wrong, that the budget deficit is bigger, but here is the worst that can happen – note, there would be no negative financial consequences,” the economist emphasized.
“Why should we tighten our belts here and pretend to be some kind of sacred cow, having one of the lowest debts and having a very clear goal of where to spend them,” emphasized the economist.
According to N. Mačiulis, Germany, while implementing fiscal consolidation policy, and Estonia, introducing new taxes, are making a mistake.
“The third year of economic recession, we have the lowest debt in the European Union (…) Here is such a religious attitude to the public debt, which costs all Estonian residents, and it should be abandoned here,” he added.
According to the economist, at the moment Europe is in stagnation and “semi-recession”, a “strong anti-cyclical fiscal policy” is needed, which would increase not only the physical security of the state, but also attract more investments.
ELTA reminds that in March, at the second meeting initiated by Prime Minister Ingrida Šimonytė, four options were presented on how to raise around 400 million next year. euros, which are needed for the additional financing of the national defense of Lithuania.
According to the first, the amount could be collected by revising progressive tax rates, taxation of individual activities, abolition of some benefits and up to 16 percent. by increasing the corporate tax. According to the second, 420 million 1 percent of euros could be collected. by increasing both the value added tax and the profit tax.
The third proposal, which would generate about 400 million euros – to increase the corporate tax rate by 2 percent. points, to cancel the preferential rate for small companies, as well as the heating and business license exemptions. At that time, the fourth offer for 400 mln. euros would consist of 2 percent. points for the defense of the increase in the profit tax and the allocation of a part of the personal income tax falling on the municipalities.
In turn, the opposition factions that did not participate in I. Šimonytė’s meeting propose to find funds for defense by introducing a bank property tax, issuing defense bonds, and reducing the shadow in the economy.
The opposition factions of the Seimas presented their proposals for additional funding for defense. Among them are proposals to introduce a bank property tax, defense bonds, an increase in the corporate tax, and a reduction in the shadow.
National defense funding in Lithuania will amount to 2.75 percent this year. from GDP, but it is aimed that this amount will reach at least 3% in the coming years.
In order to unite society and encourage politicians to agree on 4% as soon as possible. To defend the GDP allocation, civic-minded Lithuanian businesses and organizations are joining the “4 percent” initiative.
2024-04-08 07:41:46