Tax Planning and Economic Development

1
Tax Planning and Economic Development

• Dr. Margarita Starkeviciute
• International Business School
• Vilnius University

2
Competitiveness Mainly Affected by Personal
Abilities

• In a goods market, new technologies being
  available to all the countries prices will be
  determined by cheap labour (China and S. Asia)
• In a service sector, need for high quality
  services will grow due to an intensifying rhythm
  of life and more flexible forms of labour
  organisation
• Competitive advantage in production will be
  gained thanks to personal ability to utilise
  technologies in a more creative way
• Competitive advantage in services will be related
  to personal culture

3
New Challenges in Tax Planning

• Methods used - detailed modeling, efficient tax
  tariff, elasticity - are based on historical data
  but do not take full account of ongoing global
  changes
• Taxes result in high product prices and
  predetermine universal efficiency loss which is a
  significant reserve for raising competitiveness
• Deflationary processes, new technologies and an
  integrated international market offering
  opportunities to move payment of taxes to more
  favourable places reduce possibilities of making
  use of the reserve

4
Costs of Developing a Competitive Personality Grow

• More expensive education
• More complicated means and environment of
  teaching, larger information flows
• An employee wants specialised knowledge as well
  as cultural education
• Higher quality social services required
• Affect human behaviour and creativity
• Shape cultural needs
• Pressure by global changes on tax planners - tax
  revenue drops, expenditure grows

5
Problems Aggravated by International
Institutions Stabilisation Policy

• Fiscal policy emphasis on investment rather than
  productivity
• Tax relieves to foreign investors
• Tax relieves to large Lithuanian companies
• Structural policy focus on ownership
  redistribution rather than new initiatives
• Much attention to shaping demand, and a supply
  support function neglected
• Fiscal policy priority - balance of accounts
  rather than economic growth

6
Price for Fiscal Balancing - Brain Drain and
Creativity Emigration

• Countrys stability maintained by limiting wage
  growth
• Government transfers the burden of social
  expenditure from the state to the population
• Tax planning should consider the impact of a new
  tax - necessity to finance the shortage of public
  services
• Due to competition on a labour market, personal
  development and opportunity search - emigration
• Would improved social environment bring emigrants
  back?

7
Economic and Social Development in Lithuania
(real growth, per cent)
8
Economic and Social Development in Estonia (real
growth, per cent)
9
Consideration of Country Competitiveness in Tax
Planning

• All public social needs may be considered in
  planning
• Social services are poorly managed
• Universal access is not a quality guarantor
• Tax rates may have to be raised
• Effective science and social environment needs
  should be considered in planning (cost-benefit
  analysis)
• Efficiency criteria are difficult to determine
• Assessments by the employees of the same area,
  group interests

10
Experience of Company Management for Optimising
Expense Needs and Tax Plans

• Inviting management experts to administer science
  and social services
• Provision of managers personal responsibility
  for performance
• Transfer of financial functions to specialised
  accounting firms
• Provision of uniform procedures for public
  procurement of goods and services
• Outsider analysis and reduction of unproductive
  costs