2020.05.25 13:28

Lithuanian employers vow not to cut wages, if income tax is reduced

Employers in Lithuania pledged not to cut wages if the parliament reduces the income tax rate from 20 to 15 percent, and increases non-taxable income by 50 euros.

The memorandum was signed by the Infobalt association, the Investor's Forum, the Lithuanian Confederation of Employers, the Lithuanian Confederation of Industrialists, the Lithuanian Association of Chambers of Commerce, Industry and Crafts as well as the Lithuanian trade unions Solidarumas and Sandrauga.

The president has recently proposed to the Lithuanian parliament, Seimas, to temporarily reduce the income tax rate until the end of this year, as well as to bring forward the planned increase in non-taxable income by 50 euros.

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Presidential adviser Simonas Krėpšta hopes the legal amendments, if adopted, will not affect people's employment contracts and they will receive the additional income.

"One of the risks mentioned in public is that workers might not feel the whole benefit directly,” he told reporters on Monday.

“Business representatives and the majority of trade unions have agreed that if those amendments are adopted, it will not affect people's employment contracts and they will receive the whole additional revenue," he said.

However, the Lithuanian Trade Union Confederation decided not to sign the memorandum, saying it contains no real commitments from employers.

Prime Minister Saulius Skvernelis and the Finance Ministry are against the tax cut, claiming some employers are likely to reduce pre-tax wages by the same amount, keeping the after-tax income unchanged.

Lithuanian President Gitanas Nausėda put the proposals before the Seimas last Wednesday. They would cost the state around 500 million euros, and the parliament has not considered them yet.

Meanwhile, the ruling Lithuanian Farmers and Greens Union is skeptical about the tax cut initiative, saying that it would benefit high-earners. The party favours stepping up the increase in non-taxable income and proposes raising it by 100 euros.