VILNIUS - Despite backing from financial experts, the incoming Lithuanian Prime Minister's tax plans to shore up the shaky economy are not popular among citizens of the country or politicians in the Baltics.
During a prime ministerial meeting between Lithuania's acting Prime Minister Gediminas Kirkilas and his Baltic counterparts, it came out that Latvian and Estonian Cabinet leaders wouldn't approve of the crisis prevention were it to be proposed in their countries.
Latvian Prime Minister Ivars Godmanis was surprised at Lithuania's plans of raising taxes and artificially balancing next year's state budget, noting that "Latvians managed to balance the budget beforehand, however this didn't help overcome the crisis".
SEB Bankas analyst Gintanas Nauseda rejected Godmanis' analysis of the plan.
"I don't think the situation is exactly equal in the Baltic States. There are differences in exports 's in Lithuania we have more manufacturing and this allows us to be more optimistic," he told The Baltic Times.
Kirkilas said Latvia is currently focusing on promoting business, manufacturing and consuming.
Estonian Prime Minister Andrus Ansip agreed that raising taxes is no way out of the crisis.
Swedbank Deputy Chairman Tomas Aurejauskas told TBT that raising taxes is aimed at balancing internal discrepancies and would be temporary. The taxes could be reduced afterwards, he added.
Nauseda agreed, saying that Lithuania needs to balance its books before looking to stimulate the economy.
"It has come from a very deep analysis of the financial situation in the country. It isn't popular, but it is an anti-crisis plan. We should try to bring financial order and then talk about stimulation."
"We need to convince the international business community that we can survive the crisis," Nauseda added.
The 20-20-20 flat tax rates will reduce personal income tax from 24 percent, but increase corporate profit tax from 15 percent and Value Added Tax (VAT) from 18 percent.
"It's not the best way to increase the tax burden 's we should try to reduce it to stimulate the economy, but with a budget deficit close to three percent, it is a very hard problem to finance with credit resources," Nauseda said.
OPINION POLLS
According to recent polls conducted by Veidas magazine, just one in five Lithuanians support the flat 20 percent tax rate.
Of those polled, one third believed that the tax changes will have both positive and negative effects on the economy.
Only 15 percent of residents of Lithuania's five major cities and towns support the new center-right coalition's crisis prevention plan at all, which features the tax amendments as one of its policies.
One-fourth think that the implementation of this plan will have tragic consequences, the poll revealed.
