VILNIUS - Lithuania's tax system is essentially in compliance with EU legislation and is less discriminatory compared with the majority of EU old-timers, a leading audit firm reported last week, while another report stated that the country's personal income tax rate of 33 percent was the highest among those countries with a proportional tax system.
The compliance report, compiled by PricewaterhouseCoopers, analyzed eight domestic tax legislation areas, including transfer pricing, absence of cross-border relief and domestic versus foreign dividend tax treatment. The auditors found that among all 10 EU newcomers, only Latvia and Slovenia had more than two breaches of EU directives. Taxation systems in Lithuania, Estonia, Malta, Cyprus and Slovakia were found to be the least discriminatory, whereas taxation legislation in the U.K., France and Denmark contained the most divergences.
"In the past 10 years some 87 cases relating to discriminatory direct tax legislation have been heard by the European Court of Justice, of which 85 have been found in favor of the taxpayer," said Peter Cussons, international corporate tax partner at PricewaterhouseCoopers.
Meanwhile, the Economy Ministry, citing a report by the Lithuanian Free Market Institute, an independent think-tank, said that apart from Lithuania, flat taxes were also applied in Slovakia, Estonia, Latvia and Russia, at the rates of 19, 26, 25 and 13 percent, respectively.
The Lithuanian Free Market Institute said that most European countries used a progressive tax system and six of them applied a zero-tax rate on taxable income up to a certain amount. In Belgium, for example, income up to 570 euros is taxed at 25 percent, income up to 811 euros at 30 percent, income up to 1,210 euros at 40 percent, and income up to 2,478 euros at 45 percent. Income above this level is taxed at a rate of 50 percent.
Sweden, Austria, Finland, France and Cyprus apply zero-tax rates on the lowest incomes, while the highest nontaxable income level is in Sweden - 2,618 euros - while the lowest one is in Austria, at 303 euros.
The highest tax rates on high incomes are in the Netherlands (52 percent), Austria and Belgium (50 percent) and France (48.1 percent).