Agricultural policy

LFMI has submitted policy recommendations to the Parliament and the Government urging them to vote down amendments to the Law on State Regulation of Economic Relations in Agriculture. They provide that a “not higher than a 25-percent mark-up is set on agricultural products and all foodstuffs realised in the domestic market, except on vegetables and fruit, for which a mark-up not higher than 50% is to be imposed”. LFMI’s policy analysts have also analysed a draft law on the development of agriculture and rural areas and submitted a policy paper to the parliamentary committees. This law should become the main legal document regulating the agricultural policy in Lithuania, which will prescribe the basic policy principles and implementation measures. The Parliament is still debating this draft. LFMI’s policy analysts have commented extensively on the problems and prospects of agriculture during various events and in the mass media.

Budget policy

LFMI’s policy analysts have always criticised a faulty principle of state budget formation – setting, by laws, a fixed amount of budget revenues, depending on macroeconomic indicators, to be allocated to specific areas. Eventually, the Constitutional Court has concluded, corroborating the LFMI’s opinion on this issue, that laws may not prescribe expenditures to carry out permanent state functions and to finance everyday needs of the society including the agriculture. Otherwise, as decided by the Constitutional Court, the constitutional notion of the state budget would be distorted – a constitutional institute of a budgetary year would become senseless and the Government’s constitutional right and duty to draw up a project of the state budget and the Parliament’s constitutional right and duty to enact it would be denied. Furthermore, in February 2002, the Government approved of a draft amendment to the Law on Budgeting, proposed by MP K. Glaveckas, according to which allocations as a fixed amount of the budget or as a percentage of macroeconomic indicators will not be established by laws and legal acts. If this amendment is enforced, all areas financed from the budget will be granted equal conditions to receive financing, the achievement of strategic goals of the state will be facilitated, and the use of the budget will become more transparent. At present the amendment is under parliamentary debates.

Capital markets

LFMI’s policy analysts take part in a working group set up at the Sunrise Commission for improvement of capital market regulations and submit proposals on how to make the capital market in Lithuania more active. By preparing and presenting a policy paper on the development of the securities market, LFMI has initiated a wide public debate on the prospects of this market and the need to privatise Lithuania’s National Stock Exchange. The policy analysts emphasised – both in the mass media and in the policy paper for the authorities – that the future and viability of the securities market may be related only to globalisation and integration into the world capital movement, while privatisation of the National Stock Exchange would serve as a strong impetus in this respect.

Company law LFMI has submitted to the Ministry of Economy a policy paper on a draft of new law on sole proprietorships. LFMI proposed the authorities to consider the need to maintain the status of a sole proprietorship and a possibility to amend the existing Law on Companies rather than adopting a separate new law. The draft law has not been debated by the Government yet. LFMI has also made proposals regarding a draft law on companies, liberalisation of lease regulation in the Civil Code, a ban on cash settlements, etc to the Sunrise Commission. These proposals are still under the Commission’s debates. LFMI is glad to inform that the Parliament has adopted amendments to the Law on the Names of Companies initiated by LFMI. These amendments will grant more freedom in the formation and registration of company names. They allow registering names formed of letters, numbers or their combinations that may not be treated as words but that are understood as a firm’s name and are not misleading. It has also been decided that, in forming and using company names, only the norms of the standard Lithuanian language should be taken into account, while the requirements of the State Lithuanian Language Commission will not be applied.

Deregulation

Building and land sales. LFMI’s policy analysts constantly monitor and analyse legal acts regulating building activities and submit their proposals to a working group set up at the Sunrise Commission to simplify building regulations and land sales. The latest comments submitted to this group pertain to land and territorial planning: LFMI proposed to lift the existing restrictions on land rent and to simplify procedures of the preparation and approval of detailed plans as well as the maintenance and utilisation of objects of cultural heritage. The Sunrise Commission has endorsed some of LFMI’s proposals and is to submit them to the Government for consideration.

Customs. Since 2001 LFMI’s policy analysts have participated in the Customs Advisory Committee and submitted recommendations for simplification of customs procedures for residents and enterprises. However, no tangible results have been achieved so far, as the work of the Commission is narrowed to a mere exchange of information and no decisions on specific amendments have been adopted. LFMI has also formulated and submitted policy proposals on the simplification of customs procedures to a working group on transit and customs formalities at the Sunset Commission. These proposals are still under consideration by the working group. It should be noted that legal institutions recognise that certain customs regulations are faulty. For example, the Panel of Judges of the Vilnius District Administrative Court has adopted a decision that the provisions of the Customs Code permitting customs officials to determine a value of imported goods at their own discretion and to use this value as a basis for calculating VAT and import duties contravenes the Constitution of the Republic of Lithuania. The Customs Code containing this provision that has raised much doubt and has been strongly criticised by LFMI was adopted in 1996.

Education

LFMI has submitted to the Ministry of Education and Science and other relevant authorities a policy proposal on a draft law on education, emphasising the need for its revision. LFMI stated that the draft law should provide more consistently for the education system reform based on competition, decentralisation, and private initiative. LFMI’s policy analysts have discussed extensively on this issue in the mass media and during various events.

Employment regulations

During parliamentary debates of the draft Labour Code, LFMI’s policy analysts took an active part in the sittings of the parliamentary Committee of Social Affairs and Labour, emphasising the need to liberalise labour relations. Upon updating their recommendations according to the last amendments made by the Committee, LFMI resubmitted a comprehensive package of policy proposals for revision of the draft code. LFMI also sent an open letter to all MPs, drawing their attention to the changing market conditions and urging them to leave as much freedom of agreement between employers and employees as possible. LFMI’s policy analysts discussed this subject extensively in radio broadcasts and published a number of articles and comments in the press. For the time being debates on the draft Labour Code continue. The code should be adopted in April-May 2002.

Energy sector

After the Parliament returned a draft Law on Energy to the Government for revision, LFMI’s policy analysts took part in the meetings of its drafters and resubmitted their comments on the draft. They proposed that no restrictions should be imposed on competition in the energy sector and that unnecessary restraints on operation should be abolished. The drafters approved of LFMI’s proposals and removed the provisions on zoning the activities of energy transmission and distribution enterprises as well as on the right to fix energy prices and price regulation principles on basis other than according to the law. LFMI has also submitted to the Government and the Ministry of Economy comments on draft amendments to the Law on Natural Gas (Articles 5 and 12). The proposed amendments introduce two new restrictions: 1) a requirement to obtain a licence to render gas supply services to all customers, not just regulated customers as it is required in the effectual law; 2) shortening of the list of entities entitled to use the transmission system (free customers were replaced by entities that use gas as raw material and distribution entities were removed). After LFMI submitted comments, the Government rejected the amendment concerning shortening of the said list, but approved of the introduction of licenses.

EU integration

Within the framework of a project “Lithuania's Integration into the EU Single Market: the Regulatory Impact on Lithuania's Economy”, LFMI carried out a study on chemicals industry Changes in the Operation of the Achema Company in the context of EU Integration. The study analyses national and EU legal acts regulating the chemicals industry and assesses changes in the economic-regulatory environment taking place in Lithuania and their impact on the company’s operation. The study focuses on the evaluation of application of the EU trade, transport, energy, tax, social and environmental requirements in Lithuania. In addition, LFMI has prepared a study on regulatory effects on the economy in Lithuania which will be included in the World Bank publication Lithuania: Readiness for EU Integration. LFMI’s policy analysts have expressed their opinion on the consequences of integration and the need to assess them in the mass media and in various conferences and discussions.

Foreign trade

LFMI’s policy analysts have continued participating in a commission set up at the Ministry of Economy to analyse and solve issues of customs duties. LFMI has submitted a proposal to this commission and the Government Office to repeal an import duty levied on the long flax fibre. The commission endorsed this proposal and intends to submit it to the Government for consideration.

Health care

FMI has submitted comments on the principal provisions of a draft law on pharmaceutical activities to the Parliament. One of the proposals is to revoke a requirement that the owner of a pharmacy of any legal status must have a pharmacist’s or pharmacological qualifications. LFMI has also submitted its comments on this issue to the Constitutional Court, which ruled (on 14 March, 2002) that the Constitution did not permit restriction of an individual’s right to property on the basis of his education. Mandatory requirements for pharmaceutical qualifications should be established for persons who conduct pharmaceutical activities in pharmacies but not for persons who seek to own a pharmacy by the right of ownership, the Court stated.

Information technologies

While taking part in a working group on information technologies and telecommunications at the Sunrise Commission, LFMI’s policy analysts submitted a list of barriers to IT&T business and proposals how to eliminate them. Most of these proposals have been endorsed by the Supervisory Committee of the Sunrise Commission and they are to be submitted to the Government for consideration. LFMI’s policy analysts also participate in a working group on drafting amendments to the Law on Electronic Signature. These amendments aim at extending the possibilities to use e-signature in the market. At present they are being considered by the Parliament. LFMI has also submitted comments on the requirements for certification service providers (prepared by the Committee for the Development of Information Society at the Government), on a strategic plan for the development of knowledge economy in Vilnius city, and on a draft strategy for the development of an integrated system of state registers. Part of LFMI’s proposals on the latter strategy has been incorporated.

Monetary policy

Prior to the national currency’s re-peg to the euro, LFMI’s policy analysts published a great number of articles in the national and regional press concerning the introduction of euro and its effects on Lithuania and the re-peg. The policy analysts pointed out the importance of getting ready for the shift of the anchor currency and provided practical advice on how to prepare for this event.

NGO

LFMI has analysed a project of amendments to the Law on Public Institutions initiated by the Ministry of Economy and submitted a package of policy recommendations. LFMI proposed to remove a ban on public institutions to secure and guarantee third party liabilities, to lift a restriction on the right to form non-collegial bodies of a public institution, to eliminate the obligation to conclude an employment contract with the head of a public institution, etc. The project of amendments is to be debated by the parliament in the nearest future. As the Ministry of Justice was drafting amendments to the Law on Charity and Support Funds and to the Law on Public Institutions, LFMI submitted a policy proposal for their revision. So far, these drafts have not been presented to a meeting of the Government.

Privatisation and competition

As it has been mentioned (section Capital Market), LFMI has initiated a discussion on the privatisation of the National Stock Exchange. LFMI has also submitted to the Constitutional Court its conclusions whether certain clauses of a government resolution on introduction and use of cash registers comply with the Constitution and the Law on Competition. At present, competition issues are especially relevant to the regulation of the telecommunications sector (see section Telecommunications).

Public administration

Public procurement. LFMI has submitted a policy proposal for revision of the Law on Public Procurement to the Ministry of Economy, a working group on public procurement at the Sunset Commission, and to the parliamentary committees. At present, a working group at the Ministry of Economy is drafting a new version of this law, so LFMI’s policy analysts have also submitted proposals how to increase publicity and transparency of public procurement and how to facilitate the work of institutions participating therein.

Legislation. LFMI’s policy analysts have been invited to take part in the Legislation Commission at the Ministry of Justice and to chair a working group established to draw up a conceptual framework for the improvement of legislation.

Social policy

Pension system reform. LFMI has analysed a conceptual framework for the reform of state pension system and submitted comments to the Ministry of Social Affairs and Labour. The policy analysts welcomed the Government’s initiative to scrap unjustified privileges and benefits undermining social fairness, but they noted that the framework should be revised. They stated that it is necessary to define concrete dates for halting the expansion of state pensions, for reduction of their size, for revoking state pensions as well as to determine how these steps will be implemented. LFMI proposed that the reform of state pension system should be launched without delay, instead of waiting until the pension system reform is completed. The Government has not debated this framework so far. LFMI has also revised its position on the pension system reform and intends to take an active part during the parliamentary debates of a draft law on the pension reform. LFMI proposes that all citizens should be granted the right to choose whether to participate in the private fully-funded pension system or to remain in the state social security system (with an undivided social insurance contribution paid to the Social Insurance Fund). LFMI also proposes that employees should be allowed to accumulate their old-age pensions both in pension funds and in insurance companies.

Tax policy

LFMI closely monitors changes in Lithuania’s tax system and their influence over people’s welfare: they analyse tax legislation, take an active part in a working group on taxation at the Sunrise Commission, and emphasise the importance of tax reduction in public debates.

Income tax for individuals. After the Ministry of Finance prepared a draft law on the income tax for individuals, LFMI analysed it and proposed its revision in order to avoid double taxation and an increase in the tax burden. Recently, the Lithuanian Social Democratic Party has proposed the introduction of progressive income taxes which encouraged LFMI’s policy analysts to remind the public of the negative consequences of such taxation. Discussions on this issue are still underway.

Corporate income tax. After the adoption of the Law on Corporate Profit Tax, the Ministry of Finance is drafting secondary legislation, so LFMI’s team analyse and comment on them. LFMI has also submitted recommendations for revision of the procedures of proving, recovering and calculation of bad debts as well as comments on a project of order by the Minister of Finance concerning the procedure of deductions of repair and exploitation costs from companies’ income. In adopting the said procedure, it was revised according to LFMI’s proposals submitted to the Sunrise Commission’s tax group: the Ministry of Finance abandoned the requirement of vehicle expense sheets as a needless bureaucratic restriction that does not help achieve the set objectives. Thus, for fuel accounting purposes enterprises may, in place of vehicle expense sheets, refer to the readings of vehicle meters or fuel purchase documents confirming the actual fuel costs.

Value-added tax. Having analysed the provisions of a newly enacted VAT Law, LFMI’s policy analysts commented widely on its faults in the press, on the radio and TV, criticising preferential VAT tariff rates (5 percent and 9 percent - on tourism, medicines, meat, ecological products and dwelling construction financed from the budget) and restrictions on VAT returns for purchased cars. It should be noted that after LFMI submitted their comments on a draft of this law when it was debated in the parliament, restrictions were removed on VAT returns for goods and services related to the exploitation of cars and on fuel and lubricants consumed by cars.

Tax on land lease. LFMI has submitted comments on the provisions of the Law on Tax on Lease of State Land and on application of this tax to a hearing of the Constitutional Court. LFMI concluded that due to inaccuracies of provisions and terms contained in the legal acts, the authorities themselves became confused – they do not know how to apply the land lease tax established by the said law and a related government resolution, which institution should administer and collect this tax, and whether additional payments for lease may be charged. Based on LFMI’s conclusion, the Constitutional Court ruled that Clause 4.2 of the government resolution on the management of the Klaipėda State Seaport, which charged the Ministry of Transport with the responsibility of drafting and approving the rules for the lease of the territory of the Klaipėda State Seaport, run counter to Article 11(1) of the Law on Land Lease. In addition, LFMI is taking an initiative to draft amendments to the laws that would eliminate double taxation of the lease of public land.

Tax administration. At the request of the Constitutional Court, LFMI has presented arguments whether the provisions of the Law on Tax Administration and a government resolution, regarding setting of tax rates and indirect methods of establishing the tax base, are constitutional. The Court has not adopted a decision on this issue yet. LFMI intends to propose amendments to the Law on Tax Administration which would entitle the Ministry of Finance rather than the State Tax Inspectorate, as it is at present, to interpret tax legislation. After eight years of discussions, a linkup between tax collection and information systems of the State Tax Inspectorate and the Social Insurance Fund was launched; the relevant draft amendments have been registered and are under parliamentary debates at present. It should be mentioned that LFMI has submitted such proposal to all the governments.

Telecommunications While taking an active part in a working group on drafting a new version of the law on telecommunications, LFMI’s policy analysts submitted comments identifying unnecessary regulations for market participants. The Institute has also analysed a government resolution on price caps on telecommunication services and submitted its comments to the government institutions, stressing that implementation of this resolution will have negative effects on the telecommunications market.