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					      Changing the culture among
administrators: Reform strategies to better
        service the MSE segment

          Lithuanian experience
          Tax department, Ministry of Finance



                     Tbilisi, 2011-05-05
Micro and small business tax
regime in Lithuania

• 2 options of personal income tax (PIT) on business income of
  individual:
        Fixed PIT (acquisition of business certificate)
        Standard PIT
             Persons engaged in
                                                    Amount of PIT paid
              business activities      % of all                                   % of all
  Year     Standard       Fixed         PIT       Standard           Fixed          PIT
          PIT payers    PIT payers     payers       PIT               PIT         revenue
           (thousand)     (thousand)              (million LTL)   (million LTL)

  2007        23             85         5,96         118              23           2,17
  2008        26             83         6,11         111              30           1,92
  2009        29             68         5,99          64              25           2,34
  2010        21             39         3,71          22               8           0,88
Business certificate

• Fixed income tax
        Advance payment disregarding both income and expenses
        Exhaustive list of types of business + other extent restrictions
        Established by municipal councils
• Justification
        Simplification
        Intervention of municipalities
• Problems
        Level of tax
        Avoidance
• Recent and possible developments
        Minimum amount (2008) + Income limits (2012)
        Narrowing list? + Abolishing? + Presumptive taxation?
Standard PIT
on business profits

• Tax on real result
        Post-payment
        No extent restrictions (unless prohibited to deal not via enterprise)
• 2 options to calculate business profits
        Deduction of actually incurred expenses
        Reduction of business income by 30 per cent
• Recent developments
        5 per cent rate (2010)
• Justification
        Response to unemployment
        Encouragement to move from fixed PIT
Compliance issues:
Modernization of tax
administration system


• New approach to taxpayer – from enforcement collection
  to voluntary compliance
• Legal basis – Law on Tax Administration (2004): general
  principles of taxation, balance between rights and duties,
  flexible administration procedures
• Introduction and implementation of modern initiatives -
  risk management system; computerized audit system,
  electronic declaration system, taxpayer call center
Compliance issues:
Registration/formalization


• Automatic registration to Taxpayers Register via Register of
  Enterprises

• Third party information (registers, banks etc.)

• Flexible approach – rapid “informal” communication
  without application of sanctions

• Cooperation among government institutions at the all levels
Compliance issues:
assistance and service


  1/3 of staff of State Tax Inspectorate are directly
  involved in services to taxpayer

  Tax Consulting:

• Taxpayer Call Center – ~1 million calls per year
• Website statistic - ~20 millions visits per year
• Direct consultations - ~200 thousands per year
Compliance issues:
assistance and service


 Education:

• 1,5 thousand seminars for taxpayers per year
• Special guidance, publications for targeted audience

  “Supervision” and personal assistance for each new
  taxpayer (12 months)
Compliance issues:
assistance and service



Electronic Declaration System – cheap and easy

• 1,35 million registered users (authorization via STI
  passwords cards, ID cards, using e-banking , mobile network
  operators systems)
• Pre-filled tax returns (based on data from third sources -
  withholding persons, paying agents, banks, insurance
  companies, pensions funds etc.)
E-filled tax returns (%)



     100                            90
      90                       80
      80
      70
      60
                                         PIT
      50
                                         VAT
      40
      30
      20       12
      10                   3
       0
                    2004        2010
Evaluation of trends


• Survey – „Could you trust State Tax Inspectorate?‟

•   43,7% – absolutely
•   15 %– yes
•   35 %– don‟t know
•   6,7 %– no

				
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posted:8/14/2011
language:English
pages:11