The Lithuanian Free Market Institute (LLRI) announced on Wednesday that a quarter of Lithuania's economy is in underground and the struggle against shadow economy is being lost because ineffective measures are invoked. The prime minister said the information was false.
Butkevicius reassured that combat against underground economy is actively ongoing and none of the previous Governments held so many sittings passing so many actual measures as the current one has. The head of the Government gave an example that 17-25% more diesel fuel excise tax was collected in the first quarter of 2014 year-on-year.
Talking about measures against smuggling, the prime minister informed that the State Tax Inspectorate (VMI) was in discussions with cigarette manufacturers.
"Tax stamps might even be eliminated and so called 'chips' would be included in every pack, revealing who is the manufacturer of cigarettes," Butkevicius said.
The prime minister admitted that tobacco smuggling remained high. VMI is scheduled to submit an agreement with cigarette manufacturers regarding anti-smuggling measures on Thursday.
Nonetheless, Butkevicius says the greatest change will emerge when the new tax administration system is introduced. Lithuania is gaining experience from Portuguese experts who have already implemented such reforms.
"Electronic invoice records will be implemented, integrated goods and services database will be created," the prime minister informed.
The LLRI study shows that shadow economy will constitute 25% of Lithuania's economy in 2014. For the sixth year already it has surpassed pre-crisis level of 18% of GDP. According to the LLRI, in 2014 underground economy will account for 27% of the alcoholic beverages market. Meanwhile, in late 2013, 28% of the tobacco market was in underground.
According to the study, currently taxes constitute half of petrol price (VAT and excise) and around 40% of diesel price. Petroleum excise tax in Lithuania exceeds the minimum established by the EU. It is estimated that if taxes were reduced to the minimum, petrol price could fall by around LTL 0.3 (EUR 0.08) per litre.
26% of Lithuanians stated to have bought illegal fuel in 2013.
Underground economy GDP share grew rapidly since 2008 and in 2010 was 28% of GDP, whereas in 2013 was 26% of GDP.
