KLAIPEDA - With the parliamentary elections nearing, the Kubilius-led government is softening its rhetoric on the previous demand for the compulsory introduction of cash registers in outdoor markets from May 1. “The authorities have hinted of a transition period in order to allow local market vendors to prepare better for the decision,” says Zita Sorokiene, head of Lithuania’s Association of Small Businessmen and Vendors.
The postponement of the regulations - aimed to curb the massive shadow economy - will also affect small entrepreneurs operating with business certificates who, according to the regulations, were supposed to register individual enterprises from May 1.
After a mid-winter crackdown on vendors in Gariunai, the largest outdoor market in the Baltics, which revealed the bizarre plight of the market and led to the confiscation of large sums of unaccounted for money, the government urged Gariunai vendors to use cash registers from May 1. Upon the expected prolongation of the “transition” period, they will likely be exempted from the government regulations.
“We are glad that the government has come to understanding that the given deadline for the changes is impossible to meet. We’ve claimed our first small victory, but the battle is not over as we are looking forward to scrapping the policy, which makes no sense to anyone,” Viktoras Janukevicius, a vendor and member of the association, said to The Baltic Times.
Eimutis Zidanavicius, the former director of Klevas, operating a local market in Palanga, says the possible put-off is not about the government’s good will, but purely about politics. “With the political primary around the corner, the authorities try to calm and appease small vendors out of political intentions, not because of good will. However, I believe that even some cash-register-supportive government members have comprehended the regulation has done more harm than good,” Zidanavicius said to The Baltic Times.
The association head, Sorokiene, says that the Ministry of Finance as well as Seimas (Parliament) has already approved the postponement of implementation of the regulation. “The Ministry of Finance supports certain exclusions in the frame of the principle of reasonableness when it comes to use of cash registers,” Rasa Jakilaitiene, a Ministry representative, was quoted as saying. “Now we are waiting for the Tax Inspectorate’s decision,” Sorokiene says.
She agrees that the put-off draws most applause from Gariunai vendors who, until the crackdown, had mostly escaped punitive measures of the Tax Inspectorate and the Service of Financial Felony Investigation.
The crackdown brought into custody the heads of several criminal gangs, whose harm to the state budget is assessed at 6-7 billion litas.
Prosecutors in the investigation claim that well-organized criminal structures have hidden tens of millions of litas in tax avoidance, faked documents and have been involved in multiple criminal schemes. The Gariunai case has not reached court yet.
Prime Minister Kubilius has pledged to wage a full-scale war against the shadow economy and to put the 1 billion litas it generates yearly into the state budget. But with few efforts in that direction, Kubilius has been ridiculed for what seems a fiasco.
In what is seen as a step back by the government, the Tax Inspectorate has nevertheless been entitled to decide on its own which local vendors can be exempted from the use of cash registers. Relinquishing the task to the Inspectorate, the government pointed out what small businessmen are eligible for the exemptions: if the requirement causes a “disproportionally big administrative burden…”
“I reckon this formulation will be applied in most cases – the burden of the cash register is too high and a tangible benefit of the implementation of the regulation is too low. Who would chase down all those small vendors if they refused to comply with the regulation, especially in the provinces? No one,” says Danguole Pranckeniene, head of Lithuania’s Association of Accountants and Auditors.
However, tax inspectors indicate they will not grant the privilege to everyone. Vilma Vildziunaite, deputy head of the State Tax Inspectorate, says the Inspectorate is still in talks with representatives of businesses over the exemptions. Sorokiene says the negotiations are “just a formality.”
The Finance Ministry emphasizes that only outdoor market vendors will avoid prosecution for not using cash registers. Not those selling fish or meat indoors. “Those who work indoors, like vendors in kiosks, car shops, wagons and trailers, will have to use cash registers as is laid out in the government resolution,” a Finance Ministry statement reads.
Cash registers in indoor food markets have been used since spring of last year. Did they prove to be the right tool in fighting the shadow economy?
No definite answer follows, as different sides employ different arguments in defense of their positions.
“As far as Palanga market is concerned, it has seen a 30 percent drop in the number of vendors. Many small vendors quit selling before the policy’s introduction. For many of those who complied with the regulation, the price of the cash register, 800-1000 litas on average and, more importantly, the nuisances following its use, proved to be unworthy for petty earnings,” Zidanavicius stressed.
Rimvydas Rasciauskas, chairman of Consumer Cooperative in Raseiniai, admits to have believed that the demand for cash registers would ruin the trade in Raseiniai market. “However, nothing like this happened. To tell the truth, with the regulation in effect, more owners of individual enterprises willing to work in the market showed up, as the decision on cash registers was in their favor. Why so? According to the existing rules, vendors whose annual turnover doesn’t exceed 100,000 litas are exempt from the value added tax,” Rasciauskas said to Knypava.
He notes that only a few vendors left the market after the introduction. Others, working with business certificates, have instead registered joint stock companies, which require other kinds of bookkeeping.
Rasciauskas supports the idea of introducing cash registers for vendors selling non-food items as well.
He says, however, the government has started its crackdown on the shadow economy from “the wrong guys.” “This should have begun with the wholesalers and the arrangement of the customs system,” he says. The State Tax Inspectorate and some economists claim the introduction of cash registers in indoor markets has been a blow to the massive shadow economy which, to some assessments, is at 1 billion litas. “Having set the liability for food vendors, their taxed revenue has increased roughly by one-third and, in some cases, even several times,” says Arturas Klerauskas, deputy chairman of the State Tax Inspectorate. He says benefit of the policy will be better weighed in May when vendors will hand in their declarations of revenue tax for 2011.
Valdis Karnusevicius, owner of Progresyvios Tecnologijos (Progressive Technologies), a seller of cash registers, told The Baltic Times that his cash register sales have not gone up a bit since the adoption of the regulation. “I assume vendors obtain old second-hand equipment,” he said.