VILNIUS - President Valdas Adamkus jumped into the thick of the tax debate last week, proposing a slashing of personal income taxes and public expenditures, while at the same time eliminating some tax breaks.
"You can hardly find anyone in Lithuania or in the government who would object to the necessity of tax reform. The question is how the reform should be implemented. What we need is a mutual agreement," Adamkus told reporters Feb. 25.
He was also "cautious" about the ruling coalition's plans to introduce a real estate tax next year, presidential economic adviser Ramunas Vilpisauskas said after Adamkus' meeting with Finance Minister Algirdas Butkevicius last week. "In the president's opinion, we should first of all consider the possibility of cutting personal income tax and ways to use funds collected in the budget more efficiently, but not talk about introducing a new tax," Vilpisauskas said.
The finance minister echoed the statement. "I understood that the president is unwilling to approve of the tax," Butkevicius told journalists. In his words, the real estate tax is not aimed at collecting more revenues in the budget. "I see many speculative affairs in the real estate market, the market value is not settled, and there are many problems," the minister said.
During a Feb. 21 meeting, leaders of the ruling parties 's the Labor Party, the Social Democratic Party, the New Union (Social Liberals) and the Farmer and New Democracy Party Union 's decided to introduce a real estate tax as of next year. (The tax will not apply to individuals who own one home, a garden plot or a garage.) It was also decided to reduce the personal income tax rate from 33 percent to 24 percent in three years. The rate is to be brought down by 3 percentage points on a yearly basis, starting from 2006.
In Vilpisauskas' words, the president urged to cut the personal income tax "with resolution and responsibility" in order "to make companies and the entire society believe this." He did not say whether the president approved of the current tax reduction plans 's by 3 percent annually 's saying that the meeting had addressed this and other possibilities.
The president also called for thewithdrawal of value-added tax and personal income tax privileges, as well as the signing of a political agreement on responsible fiscal policy that would commit parties to refrain from measures that could distort the positive effects of tax cuts.
Adamkus has authorized his economic adviser to meet with government representatives and consider the practical aspects of tax reform, including the population groups that might see their tax rates go down, and the scale of cuts in public expenditure.
Adamkus also proposed to review and possibly eliminate some tax breaks for sections of the population. Earlier this week Butkevicius said that income tax rate cuts would not be accompanied by the elimination of income tax breaks currently in effect.
