2013年-IMF国际货币组织全球_Toward_A_Sustainable_and_Inclusive_Consolidation_in_Lithuania_Past_Experience_and_What_is_Needed_Going_Forward_18页_1mb

Summary of "Toward A Sustainable and Inclusive Consolidation in Lithuania: Past Experience and What is Needed Going Forward"

Core Content

This working paper by Nan Geng analyzes Lithuania's fiscal consolidation efforts since 2009, focusing on the composition and quality of measures, and evaluates their impact on sustainability and inclusiveness. It argues that while Lithuania has made significant fiscal adjustments, the reliance on expenditure measures has limited the long-term sustainability of the consolidation. The paper suggests that shifting the focus to revenue measures could help achieve a more balanced and inclusive fiscal adjustment.

Main Views

• Fiscal Adjustment Composition: Lithuania's fiscal consolidation from 2009–2012 was primarily expenditure-based, with expenditure cuts accounting for about 70% of the total adjustment. Revenue measures were limited and mostly focused on indirect taxes and one-off adjustments, with direct taxes (especially wealth taxes) largely untouched.

• Quality of Measures: The quality of fiscal measures has declined over time. Less than a third of the measures were permanent, and about a fifth merely postponed deficits. Temporary measures are less effective in ensuring long-term sustainability.

• Tax System Characteristics: Lithuania's tax system is skewed toward labor and consumption taxes, with limited taxation on capital and wealth. This contributes to a relatively regressive tax structure, especially for higher income groups. The country's revenue-to-GDP ratio is among the lowest in the EU, and its tax effort is also below regional peers.

• Income Redistribution: The tax system plays a limited role in income redistribution, particularly in reducing inequality. In contrast, the social benefits system has been more effective in protecting vulnerable groups from the crisis, though Lithuania's at-risk-of-poverty rate after social transfers remains higher than its regional peers.

• International Experience: Countries that have successfully implemented fiscal adjustments have used broad-based, high-quality, and inclusive revenue measures. Examples include Canada, Finland, Ireland, and New Zealand, which expanded tax bases and reduced exemptions to create fiscal space and promote equitable growth.

Key Information

• Fiscal Deficit and Debt: Lithuania reduced its fiscal deficit from 9.4% of GDP in 2009 to an estimated 3.2% in 2012. Public debt reached 40.7% of GDP by end-2012, up from 15.5% in 2008.

• Tax Burden: Lithuania's overall tax burden is significantly lower than the EU average and regional peers. In 2010, it stood at 27.2% of GDP, compared to 38.4% in the EU and 32.2% in CEE countries.

• Tax Structure:

  • Consumption Taxes: Account for 42% of total tax revenue in Lithuania, compared to 29% in the EU.
  • Labor Taxes: Account for 49% of total tax revenue, similar to the EU average (51%).
  • Capital and Wealth Taxes: Contribute only 9% of total tax revenue in Lithuania, versus 20% in the EU.

• Tax Effort: Lithuania's tax effort in 2011 was 60.8, significantly lower than the 77.1 average of its CEE peers. This indicates underutilization of tax potential, possibly due to low public goods provision or inefficiencies in tax collection.

• Implicit vs. Statutory Tax Rates: Implicit tax rates in Lithuania are well below statutory rates, especially for corporate income (4.9% vs. 15%), labor (31.7% vs. 55%), and consumption (18.2% vs. 21%). This gap is attributed to generous allowances, exemptions, and compliance issues.

• Inequality and Redistribution: Lithuania's Gini coefficient in 2010 was the highest in the EU. Social benefits reduced the Gini coefficient by about 50%, while the tax system reduced it by only 8%. The redistributive role of taxes has declined since 2006, possibly due to worsening tax compliance and an expanding informal economy.

• Recommendations: The paper advocates for a shift in fiscal consolidation toward revenue measures, particularly by broadening the tax base and improving tax administration. It highlights the potential for wealth taxation, especially on residential property and motor vehicles, to generate additional revenue and enhance the progressivity of the tax system.

Conclusion

To ensure a sustainable and inclusive fiscal adjustment, Lithuania should prioritize revenue measures that are broad-based, progressive, and efficient. This includes expanding wealth taxes, improving tax compliance, and enhancing the tax administration system. By doing so, the country can create a more equitable and resilient fiscal framework for the future.