According to the Lithuanian Free Market Institute (LFMI), the shadow economy accounts for 26% of the GDP in 2012. At least 4 out of 10 farm units execute their activities in shadow, delfi.lt reported on 13 September.
LFMI announced that the largest share of the shadow economy belongs to the smuggling of cigarettes, alcohol, fuel and other goods. This activity accounts for about 35 percent of the shadow economy. Second place belongs to illegal employment and wages “in envelopes” (23%). Tax evasion accounts for 21 percent, and trade of illegal goods and services accounts for 12 percent of the shadow economy.
According to the Institute’s survey, this year’s State Budget will lose 410 million LTL of excise due to the smuggling of strong drinks. It is believed that untaxed alcoholic beverages account for 36 percent of the total market.
The survey shows that only 40 percent of the population does not justify the illegal use of alcohol. Seven percent fully justify and 26 percent are likely to justify.
LFMI estimates that due to the black market of cigarettes, the state loses 11 million LTL of revenue and it accounts for 29 percent of the total market.
Belarusian cigarettes increasingly fill the Lithuanian market. Before the crisis, most smuggled cigarettes came from Russia. However, since 2010, cigarettes have increasingly come from Belarus. It is estimated that this year 25 percent of cigarettes have come from Russia and 75 percent from Belarus; accordingly in 2010 – 56 and 44 percent.
An important part of the shadow economy is the expressed illegal fuel trade. It is possible that the illegal fuel trade reaches 15-20 of all fuel market. For every 50 liters of illegal fuel, the state loses 118 LTL of taxes.
Cigarettes in Belarus account for only for 1 litas.
Senior expert of LFMI Vytautas Žukauskas claims that the shadow economy in Lithuania is led by usual factors: the rate of taxes, the country’s economic situation, standard of wages and life quality.
“Excise taxes in Lithuania are not the highest in the EU, but due to low wages it is difficult to afford excised goods,” explained the specialist.
People’s tolerance of the shadow economy is also a contributor. The LFMI survey shows that 61 percent of Lithuanian populations justify the use of illegal good and only 39 percent do not. Even more contributes to the country’s level of corruption.
“Also we have one more specific reason: a geographical location and prices in the neighboring countries,” said V.Žukauskas. In Lithunania, 0.5 liters of vodka in Lithuania cost 18 LTL; in Kaliningrad it costs 11.9 LTL, and in Belarus it costs 11.97 LTL. A liter of diesel in Lithuania costs 4.71 LTL; in Russia and Belarus it’s almost two times cheaper. The average price of a pack of cigarettes in Lithuania is 7.77 LTL, but cigarettes in Russia cost 2.07 LTL. The cheapest cigarettes in Belarus cost only 1 LTL.
Translated by Ernestas Bogdanov
Edited by Tara Edelen