The Lithuanian Free Market Institute (LFMI) conducts regular surveys among Lithuanian opinion leaders to elicit their attitudes to the emerging market economy and judgements on the ongoing reform process. The questionnaires are designed to follow up on previous polls to ascertain shifts in opinion and the proportion of people supporting free market solutions. The opinion polls target top policy shapers and makers, leading entrepreneurs, academia, reporters, and a cross-section of public leaders.

The scope of shadow economy

According to the LFMI's survey, opinion leaders believe that informal or partly informal activities acount for more than one third of Lithuania's economy. The scope of the shadow economy is believed to vary from 10 percent in education to 46.6 percent in real estate and trade (see List 1).

Different professional groups voiced quite distinct opinions about the magnitude of the shadow economy. Journalists produced the highest estimate of 41.7 percent. Civil servants ranked second, with an average estimate of 38.5 percent. Entrepreneurs and academia indicated 37.5 and 37.3 percent respectively. Politicians maintain that the informal sector constitutes 36.4 percent of the country's economy.

How to reduce the shadow economy

Seeking to reduce the shadow economy, Lithuanian opinion leaders would in general rely on tax cuts and the improvement of tax accounting. The importance of these measures was estimated at an average of 7.4 points on a 1-10 scale, with 1 representing the lowest and 10 the highest degree. There was not much distinction in the opinions about other ways, including a stricter control of tax compliance, business liberalisation, and heavier penalties for illegal or partly illegal undertakings. The effectiveness of these measures was estimated at 5.6 to 5.8 points.

In terms of individual professional groups, politicians seem to advocate a stricter control of tax compliance, cutbacks in tax rates, and a simpler accounting mechanism. Entrepreneurs are in favour of tax cuts, simpler tax accounting, and business liberalisation. Journalists, scholars and state officials share the general views.

As compared to the previous polls, there was a slight shift in opinion about the ways to combat corruption. All of the measures specified in the questionnaire were viewed as quite essential (see List 2). Understandably, state officials were less than enthusiastic (3.9) about cutting the state apparatus. Appropriate salaries and social guarantees, they believe, would be the most effective measures to curb corruption (7.2). Journalists and entrepreneurs appeared to be the staunchest proponents of a small state apparatus (6.5 and 5.2 points respectively). Quite consistent in their opinions, they would approve of government's declining involvement in economic affairs (6.6 and 6.7 points respectively).

List 1. Opinion Leaders About the Share of Shadow Economy by Activity (percent)

Trade in real estate 46.6
Retail trade 46.5
Wholesale trade 46.4
Financial mediation 44.2
Services (utility, hotels, nourishment) 38.5
Construction 36.7
Industry 33.5
Medicine 32.4
Energy 31.9
Transport 28.0
Agriculture 24.8
Communication 20.5
Education 10.1

List 2. Opinion Leaders About the Effectiveness of Ways of Curbing Corruption (points on a 1-10 scale)

Severe penalties for accepting bribery 6.4
Appropriate salaries for officials 6.2
Curtailment of government involvement in the economy 6.1
Privatisation of state assets 5.6
Severe penalties for bribery 5.2
Cutbacks in the state apparatus 4.9
Renewal of the state apparatus 4.7