LFMI is analysing economic causes of smuggling

In April the Lithuanian Free Market Institute (LFMI) launched a project on smuggling which is aimed at encouraging debates about economic causes of smuggling and the most effective ways of reducing smuggling and the related shadow economy both in Lithuania and the European Union (EU).

As part of the project, LFMI conducted a sociological survey with a view to ascertaining public opinion about smuggling of excisable goods and other taxed goods (tobacco, alcohol, fuel, and sugar), public tolerance towards smuggling, the scope and trends of smuggling, public opinion about primary and secondary causes of smuggling and about the effectiveness of public policy, administrative and legal measures designed to combat corruption and smuggling.

As the survey showed, the majority of Lithuanian population believe that the major causes of smuggling in Lithuania are price differences between the neighbouring countries determined by high taxes (excise duties). Corruption and overly complicated environment to perform legal business activities were named as other important factors of smuggling. According to the survey, people in Lithuania are rather tolerant towards smuggling: nearly half of those polled (47 percent) completely justify or tend to justify smuggling, while the other half (47.8 percent) uphold the opposite view. It is interesting to note that those who completely justify smuggling are twice as many as those who completely disapprove of it.

LFMI also conducted analytical research aiming to asses the existing tax, regulatory, administrative and legal factors of the market of excisable goods and their implications for the operation and trends of the market and smuggling of excisable goods. Based on the research findings, LFMI formulated conclusions that would help create and implement policies to reduce smuggling of excisable goods. LFMI concluded that primary reasons for smuggling are high prices of goods that are determined by high excise duties and extensive, cumbersome and unpredictable licensing and regulation. That is why scrapping redundant regulation and licensing and striving for the reduction of excise duties at the EU level would serve as the most effective tool in combating smuggling.

To present project results to the public and the decision makers, LFMI held two press conferences and staged a major international conference “Economic causes of smuggling. Challenges for the new European Union,“ July 1, 2004. Apart from the said issues, participants of the event analysed the situation of smuggling in Lithuania and the neighbouring countries, its causes, the experience of foreign countries in struggling against smuggling, as well as EU tax policy, motives, development and trends of heavily taxed goods. The audience comprised approximately 100, including members of parliament, high-ranking government officials, ministry executives, leading business people and representatives of major business associations, international institutions, academia and mass media.

After joining EU, Lithuania became responsible for EU’s external border of almost 1000 km. For this reason, issues of fighting smuggling and border control are very pressing and interest the EU. LFMI thinks that the issues of combating smuggling should be included among top priorities on the agenda of Lithuania’s representatives in the European Parliament because Lithuania’s good repute in the new Europe will depend on its abilities to harness increased smuggling. LFMI highlights that the influence of economic factors – heavy burden of excise duties and broad regulation – on smuggling is crucial, therefore it is vital to start eliminating them because administrative methods and means of tightening border control alone fight only with the consequences, therefore they will not help fight smuggling which is causes increasingly disastrous results.

The findings of the project will be posted online at: http://www.freema.org/Projects/Contraband.phtml.

LFMI’s Handbook for 2004-2008 MPs and their voters is underway

In summer 2004 LFMI will publish a book Knyga 2004–2008 metu Seimo nariams ir rinkejams (a Handbook for 2004-2008 MPs and their Voters) which is aimed at inspiring the pre-election debates about values, goals and ways leading to them as well as to encourage quick and viable changes right after the election. This book presents a kind of digest of LFMI’s work since its inception, outlining the institute’s position and insight in all areas of its expertise. This book is expected to be a valuable guide for political parties in preparing well-considered programmes for the Year 2004 parliamentary elections. It will also help voters judge how viable and realistic electoral promises are.

The book presents comprehensive analysis of main public policy issues and assessment of policy pursued to date and offers a clear, consistent framework for a policy reform agenda. The publication covers ownership protection, privatisation, prices, competition, consumers’ rights, company law and business regulation, money and banks, taxes, trade with EU and other countries, labour policy, corruption, social security, health care, state finances, agriculture, legislature, knowledge economy, and others.

The book will be presented at a round-table discussion on 2 September 2004 which will draw political and business leaders, media representatives, policy analysts and political scientists. LFMI will also launch a dissemination campaign that will be targeted to enhance public understanding, to stimulate well informed debates and to facilitate the adoption of well-judged decisions during the election process.

LFMI first published such type of book four years ago which was tailored for MPs and voters of the year 2000 parliamentary elections and presented analysis of, and solutions for, the then economic and social policy.

LFMI will analyse electoral programmes for parliamentary elections

In autumn 2004 LFMI and the Institute of International Relations and Political Sciences will implement a joint project which is aimed at analysing electoral programmes submitted to the parliamentary elections of the year 2004. This project is designed to offer a structured approach to creating electoral platforms and stimulating informed public debates and prudent involvement in the election process, thus promoting sustainable, consistent and predictable policy reforms for the benefit of people’s welfare.

The specific objectives are to write material Agenda 2000 and to disseminate an independent assessment of electoral platforms and to provide timely and effective expert advice to voters. A broad dissemination campaign will be designed to increase people’s awareness of electoral promises and their viability and help them make well-informed electoral decisions.

LFMI releases the 13th survey of the Lithuanian economy

In April LFMI released the 13th survey of the Lithuanian economy, based on market participants’ 2003 estimates and updated forecasts for 2004. This Lithuanian-English study analyses GDP growth, the shadow economy, foreign trade, price changes, unemployment, the tax burden, the projected LTL/USD exchange rate, earnings, household income, savings and investments, the profit margin, return on equity, reinvested profits, interest rates, etc. Launched in 1997, the LFMI survey is based on the expert consensus paradigm originating from the theory of rational expectations

The survey conducted in January-February this year shows that in 2003 the Lithuanian economy grew rapidly; the financial situation of Lithuanian companies improved and the costs of borrowing declined. Market participants predict the year 2004 will see a rise in earnings, a more rapid growth of household income, continued improvements in corporate indicators and rising costs of borrowing.

Tax Freedom Day Receded and Came on May 8th in 2004

According to LFMI‘s annual calculations, Tax Freedom Day in Lithuania is receding: it fell as late as on May 8 this year. In 2004 the average Lithuanian taxpayer had to work 128 days to pay the total tax bill imposed by all levels of government.

The Tax Freedom Day is a symbolic day in the year when the average income earner stops handing over all his income to the government, and begins to make money for himself. It is an indicator of the tax burden in relative terms which shows what portion of the value created by the people is taken by the government to be distributed through the national budget and non-budget funds. LFMI calculates the tax burden as the ratio of total tax revenues to net national product (NNP).

This year Tax Freedom Day arrived even six days later than in 2003. This increase in the tax burden was determined by total tax revenues which were nearly 2 billion litas bigger as compared to the year before. Another reason was a sluggish NNP growth due to sizeable capital consumption and markedly increased negative net income. The tax burden, calculated as the ratio of total tax revenues to NNP, will account for 35 percent in 2004, as compared to 33.3 percent in 2003.

LFMI started the tradition of commemorating Tax Freedom Day in Lithuania in 1993. Since 1993, when the Lithuanian taxpayers turned to the government everything they earned until April 13, Tax Freedom Day has moved later in the calendar. Starting from 2001, Tax Freedom Day came earlier every year: on May 15 in 2001, on May 4 in 2002 and on May 3 in 2003.

Lithuanian free-marketeer ranks among ten people who have changed Lithuania

As Lithuania was approaching EU membership and looking over the events of the last decade, the leading Lithuanian weekly Veidas released a list of ten individuals who have changed Lithuania. LFMI founder and chair of the board Elena Leontjeva was listed among such personalities as Former Presidents of the United States and the Soviet Union Ronald Reagan and Mikhail Gorbachev, Lithuanian Cardinals Vincentas Sladkevicius and Audrys Juozas Backis, diplomat Stasys Lorozaitis, poet and moral authority Justinas Marcinkevicius, former heads of state Vytautas Landsbergis, Algirdas Brazauskas and Valdas Adamkus and EU Commissioner Gunter Verheugen.

It was not only the spiritual revolution. Ground of the new economic order had to be laid, writes Veidas about the events of 1990-ies, and it was the Lithuanian Free Market Institute that showed the way. “The Lithuanian Free Market Institute, headed by Elena Leontjeva for more than ten years, brought about the most visible change in enlightening the government and the public about the advantages of the free market,” – writes Veidas. The article elaborates on some of the most celebrated achievements of the past. Leontjeva’s active involvement gave material results ten years ago when the Government listened to the advice of the Lithuanian Free Market institute and adopted a currency board system. Today it is even difficult to evaluate the profundity of the change that this move has made.

The weekly also cited Ms. Leontjeva’s indubitable merit in reducing bureaucracy and eliminating business constraints as well as her contribution to the economic enlightenment of the society, the youth in particular.

Ms. Leontjeva, who now lives away from the public eye and is writing fiction, said that being on the list of the distinguished ten came to her as a wonder and a reward. “To be ranked among such statesmen is a reward, especially for a person who chose to serve people from an independent non-governmental institute. It is true governments came and went, while we had to stay and to continue patiently our work both with them and with people who were impatient to live a better life. Sometimes I felt like a bridge between and beneath different governments and now in retrospect I understand that it was what people call moral responsibility. It feels good to know that people have acknowledged the load that we kept carrying through the years of reform. But my thoughts are in the future.”

LFMI’s President took part in annual events of the US two most famous NGOs

On April 28-29 LFMI‘s President Ugnius Trumpa participated in the 4th Annual Liberty Forum, Chicago, United States, organised by the Atlas Economic Research Foundation. The event is traditionally held to create one of the best networking opportunities of the year for think tank leaders and their allies.

During a session on think tank strategies, Mr. Ugnius Trumpa delivered a presentation on communication strategies “Positioning Your Institute to Achieve Real Policy Impact.” LFMI’s President used an allegory of a lighthouse in describing the nature of think-tanks: “Think-tanks should be as lighthouses for reforms in societies. They are essential for navigation of reforms; they do not navigate themselves but lead navigation, firmly standing on the foundations of ideas and principles.”

Mr. Trumpa pointed out that think-tanks should be government-focused but not government-driven, in order to retain a distance needed for rational analysis and criticism. They should be apolitical and co-operate equally well with all parties and coalitions and to propose ideas and reforms that they themselves strongly believe in, without politicking and distorting them.

LFMI‘s President said that think-tanks can become credible sources of information for the mass media and their consumers only by providing outright and honest comments and evaluation of processes ongoing in society. In Mr. Trumpa‘s opinion, think-tanks should ensure transparency of their funding:

supporters should finance general ideas that are needed for wide circles of society and to avoid in their activities lobbyists‘ interests and funding from them.

One of the sections was devoted to introducing the Templeton Freedom Awards Program 2004 Winners. During the ceremony LFMI’s President Ugnius Trumpa was awarded a prize of the Templeton Freedom Awards Program which was given to the Lithuanian Free Market Institute in the category of Institute Excellence. Three institutes from The Czech Republic, Slovakia, and Serbia & Montenegro were other organisations from Eastern Europe which were granted the same award. Over 140 institutes from more than 50 countries took part in the Templeton Freedom Awards Program. (In the picture: at the ceremony of the Templeton Freedom Awards giving (From the left) Alejandro A. Chafuen, President & Chief Executive Officer, Atlas; Ugnius Trumpa, LFMI‘s President, and Leonard P. Lingio, President of the Mont Pelerin Society).

On April 29-30, LFMI’s President Ugnius Trumpa also took part in the Annual Meeting of the Heritage Resource Bank, Chicago, which is held each year by the Heritage Foundation following the Atlas Liberty Forum.

The Heritage Foundation’s Annual Resource Bank Meeting gathers more than 500 think tanks executives, public interest lawyers, policy experts, elected officials, and activists from around the world to discuss issues, strategies, and methods for advancing free market, limited government public policies. This year the theme of the event was „The Road to Serfdom After 60 Years: Are We On the Road to Prosperity?.“

LFMI representatives attend a summit of the world’s leading market liberals

On April 8-9, 2004 LFMI’s President Ugnius Trumpa, Chair of Board Elena Leontjeva and former Vice-President Ruta Vainiene participated in an international conference “A Liberal Agenda for the New Century: A Global Perspective,” Moscow. The event was organised by Cato Institute, co-sponsored with the Institute of Economic Analysis and the Russian Union of Industrialists and Entrepreneurs.

The conference drew the world’s leading market liberals such as Leszek Balcerowicz, Former Minister of Finance, Poland; Ruth Richardson, Former Minister of Finance, New Zealand; José Piñera, International Centre for Pension Reform and Former Minister of Labour and Social Security, Chile; Andrei Illarionov, Economic Advisor to President Vladimir Putin, Russia; and others. They gathered at this important conference to bring perspective on reform accomplishments and to highlight outstanding issues that are fundamental to achieving freedom and prosperity.

LFMI’s Chair of Board Elena Leontjeva delivered a presentation on the topic “Promoting Economic Freedom: What Have We Learned?” (it can be accessed at: http://www.freema.org/Events/Papers/el.phtml).

LFMI is mostly thankful to International Policy Network (IPN) and its director Julian Simmons and Kendra Okonski for the financial assistance in attending this extraordinary event.

LFMI’s board has appointed a new vice-president

On May 1 of this year, LFMI’s Senior Policy Analyst Dr. Remigijus Simasius was appointed LFMI’s Vice-President, replacing LFMI’s long-term Vice-President Ruta Vainiene who stepped down in decision to take up a position in a different sphere.

Ms. Vainiene has worked at the Institute since its inception in 1990 and has headed its team of policy analysts for the last nearly five years. At her resignation she said she would remain a faithful advocate of the free market ideas and expressed a strong belief that the future would belong to them.”

Mr. Simasius has been with LFMI since 1996. He is an expert of fundamental economics and the theory of law and has gained recognition from both Lithuanian and international audiences. Being an authority on the non-government sector principles and activities, he has taken an active part in building legal foundations of the third sector, has headed a working group on legislature, has contributed to crafting the guidelines for pension reform and has been promoting the ideas of liberty in other spheres.