Exposing Regulatory Barriers to Business Growth: LFMI's Position

On May 20, 1999 LFMI held a seminar "Exposing Barriers to Business Growth: LFMI's position," which took place at the Litexpo exhibition center in Vilnius during an exhibition "Business Contacts and Management." The seminar drew participants from banks, insurance companies, brokerage firms, and other financial institutions. The participants were familiarised with LFMI's efforts in improving the business environment in Lithuania and its input to the policy debates on the abolition of corporation tax. LFMI presented proposals for a revision of employment regulation and highlighted hindrances to the passage of the pension fund legislation. Finally, the participants were acquainted with LFMI's survey of macroeconomic variables.
In an opening presentation, LFMI's President Elena Leontjeva noted that the obtrusive regulatory system is the main stumbling block to business development in Lithuania. The speaker exposed the government's inclination to create ever-larger corporate welfare programmes which pervert the aims of freeing business activity, simplifying the tax system and ensuring a favourable business climate for all market participants. Elena Leontjeva stressed the need to remove excessive regulatory constraints to business activity so that entrepreneurs would devote their energy and resources to fostering their businesses rather than satisfying the government's whims.
Elena Leontjeva elucidated LFMI's position on competition and the problem of a current account deficit. The latter, the speaker argued, is but an illusion if the issue of government borrowing is skipped. Leontjeva criticised the newly introduced taxation of interest paid abroad, which was intended to reduce the opportunities of the private sector to borrow internationally. Luckily, taxation of interest payable to banking institutions had been revoked in response to the opposition from LFMI. In the context of business deregulation, the licensing system and employment regulations were singled out as priority areas for reform. "The only problem, Elena Leontjeva said, is with the implementation of business deregulation, as the executives of these reforms are the very same institutions which create regulations."
Remigijus Šimašius, Legal Expert at LFMI, reviewed the most oppressive employment regulations and presented LFMI's proposals for reform. LFMI's Senior Policy Analyst Rūta Vainienė looked at the flaws of the tax system in general and the corporate tax in particular. The corporate tax is one of the most defective and distortionary taxes, the speaker argued, as it punishes initiative, success and the ability to earn and to let others earn.
A comprehensive account of the goals and methodology of LFMI's survey of macroeconomic variables was provided by Policy Analyst Guoda Steponavičienė.