LFMI‘s President debated on the future of Iraq‘s economy in Baghdad

On September 20-21, LFMI’s President Ugnius Trumpa participated in a round table discussion in Baghdad, Iraq, which was held to encourage leading Iraqi civil servants and businessmen to implement market reforms and to share Central European and Baltic experiences to help Iraq in a transition process.

As The New York Times wrote after the event, a select group of leading architects of Eastern Europe’s structural reforms in the last decade gathered in Baghdad “to describe the lessons they have learned in moving from tyranny to democracy.”

“Our European colleagues... know the challenges of transitioning from command economies to free markets,“ said Colin Powell, US Secretary of State, in a video address. “They also can attest that staying the course of reform is well worth the struggle.” As the conference organisers told the Financial Times, they were turning to “new Europe” to help lay the foundations of a “new Middle East.”

Fourteen speakers from Europe outlined lessons learned in privatizing state-owned enterprises, promoting a healthy business and investment climate, fostering private sector development, and implementing sound fiscal policy. The event was organised by the U.S. Department of State and the U.S. Agency for International Development.

The Institute analyses problems of tax administration

Pursuing activities in the area of tax policy, LFMI analysed a new draft version of the law on tax administration and submitted comments to relevant state institutions. LFMI criticised provisions of the draft law specifying that banks and other undertakings must provide information about the amounts of cash paid out to customers, bank accounts opened and closed in Lithuania and in foreign countries, securities purchased and goods and services sold. LFMI policy analysts argue that purposeless and massive collection of information will only inflict extra costs on market participants without ensuring better tax collection.

LFMI also criticises a provision which lays down banks’ obligation to write off tax arrears from the taxpayer’s bank account as such a procedure goes against the approach that the taxpayer should “pay” taxes rather than the tax collector should “collect” them. Tax compliance should not be encouraged and ensured by such draconian measures.

LFMI also concluded that seeking to avert “fierce actions” it is expedient to confine the objectives of the State Tax Inspectorate to the execution of legal acts regulating tax administration. The policy analysts believe that the Inspectorate should not participate in shaping the tax administration policy.

Moreover, LFMI recommended that ambiguities and inadequacies in tax laws should be solved in favour of the taxpayer ultimately and unconditionally, that taxpayers should be allowed to choose the form for submitting a declaration of income (electronically or on paper), etc.

LFMI presented the 12th survey of the Lithuanian economy

In September LFMI presented the twelfth survey of the Lithuanian economy providing market participants’ forecasts for 2003 (updated) and 2004. The survey conducted in July through August 2003 shows that in 2003 the growth of the Lithuanian economy will intensify, personal earnings will continue to go up, the costs of borrowing will decrease but financial indicators of companies are not expected to change. Market participants predict that in 2004 the economy will grow at a similar rate, household income and personal earnings will rise more rapidly and corporate indicators will improve. A summary of the survey can be accessed on-line at http://www.freema.org/Projects/Survey12.phtml.

LFMI completed a project on protection of ownership rights

In September LFMI completed a half-year project “Protection of Ownership Rights and Public Policy on Economic Sanctions” which was implemented in co-operation with the Lithuanian Centre for Human Rights. The goal of the project was to promote the development of an effective ownership protection system by identifying the problems related to the establishment of the ownership concept in the Lithuanian law and by submitting recommendations on how to better protect ownership rights in relation to the establishment of economic sanctions and their application.

Within the framework of this project, a quantitative survey was conducted to find out the opinion of Lithuanian companies about tax administration and policy on protection of ownership rights. The survey showed that, contrary to a popular belief, the biggest danger to the ownership of Lithuanian business people is posed by ill-written laws and their inappropriate implementation rather than the acts of law enforcement agencies and tax administrators. A total of 45.5% of respondents believe that their ownership is not safe and as much as 50.8% claim that more explicit and stable laws would be a decisive factor in reducing the number of violations of tax laws.

The major task of this project was to develop a comprehensive study on policy of ownership rights and economic sanctions. It presents analysis of regulation of ownership rights in principal international and national legal acts. According to the analysis, the ownership right and its interpretation are conceived virtually the same both in the European Human Rights Convention, the Constitution of Lithuania and other legal documents in Lithuania. However, striving for better protection of ownership rights, it is essential to amend certain legal acts and principles of legislation.

The study also analyses economic sanctions laid down in the Lithuanian legal acts. A special focus is placed on provisions of the Law of Tax Administration and the Code of Administrative Violations of Law. The central object of this analysis is the problem of compatibility of ownership rights and economic sanctions.

The results of the project were presented at a press conference in April and a seminar held in June. The project was financed by Democracy Commission Small Grants Program, U.S. Embassy. The study in Lithuanian can be accessed on-line: http://www.lrinka.lt/Projektai/Nuosaps.phtml.

LFMI implements a project on economic security

In September LFMI launched a new project which is aimed at conducting a scholarly study on how to ensure and tighten economic security in Lithuania. The overall goal of the project is to analyse preconditions needed for the ensuring and strengthening of economic security in Lithuania and to propose the most fitting policy measures. The study will analyse a concept of economic security and different approaches towards it. It will provide an evaluation of policy measures currently taken in Lithuania as well as legal, economic, financial and political factors and their affects on economic security. The study will also assess practices of other countries, mostly the EU member states, and will single out and evaluate basic risk factors and measures of increasing security based on different approaches to this phenomenon. LFMI will provide valuations and conclusions that could be incorporated into a programme on state economic security.

The project will be completed in December 2003. LFMI has won a tender announced by the Ministry of Economy of Lithuania.