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Wage increase to squeeze small businesses

Jan 09, 2013
From wire reports

VILNIUS - Since the minimum monthly wage (MMA) was increased to 1,000 litas (289 euros) as of Jan. 1 in Lithuania, the prime minister has promised to introduce support benefits to small businesses, reports ELTA. Prime Minister Algirdas Butkevicius says that this question has already been settled with the State Tax Inspectorate (VMI).
“We have talked with the State Tax Inspectorate. I think that soon, if there is a need, all documents will be prepared, so that they [small business owners] would be able to apply to VMI with the calculations and evidence that there is a need to postpone tax payment,” said Butkevicius on Jan. 3  after a Cabinet sitting.
The minimum hourly wage has been set at 6.06 litas.

According to the government, once MMA is increased, the income of employees receiving MMA will grow; therefore, the number of people receiving social benefits will drop, it is assumed. The net salary, the amount remaining after the deduction of all taxes, will stand at 824.5 litas.
This decision is also expected to help fight against the black economy: part of the illegal earnings will be legalized, the contributions to the State Social Insurance and Health Insurance Funds will grow together with social guarantees for employees.

It is estimated that the increase of MMA will affect around 200,000 employees, including about 50,000 employees of budgetary institutions.
Small business in Lithuania needs more support.
During 2012, a total of 1,375 Lithuanian companies went bankrupt; this is 64 more than in 2011. In addition, the average lifespan of a bankrupt company shrank.

According to Creditinfo data, the number of bankruptcies in the catering sector rose at the highest rate, or by 55 percent to reach 113. This index in retail trade went up by 42 percent in a year. The  dynamic growth of retail trade bankruptcies was not curbed by growing consumption.
In 2012, a total of 214 bankruptcies were registered in the services sector; this number remained nearly unchanged from the previous year. Positive trends dominated in the sectors of transport, construction and real estate, as the number of bankruptcies in those sectors went down by 9-11 percent compared to 2011.

The number of bankrupt companies in Lithuania reached its peak in 2009 with 1,794 bankruptcies in the year.

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