Lithuanian farmer taxation modelling

Abstract

Agriculture is important for Lithuania’s economy as the former creates the gross value added and new jobs and carries substantial value in social, ethnocultural and environmental aspects. Farming is becoming a profitable business in Lithuania, and farmers become gradually integrated into the common national tax system. The state, however, has not yet fully realized the potential of farmer income taxation; meanwhile, farmer taxation may contribute to reduction of the fiscal budget deficit. Moreover, following the reduction or seizure of the EU support to agriculture anticipated after 2020, taxes will become the major factor promoting viability of farmers’ farms. The research problem is what would be an optimal farmer tax system that would promote economic viability, competitive ability and long-term sustainability of farms. Hence, the object of this research is farmers’ farm taxation system in Lithuania. The research aim is to assess the tax burden on farmers in Lithuania and identify the possibilities for optimisation of taxation following thorough analysis of farmer taxation models in the EU countries. Theoretical background of the research is the theory of optimal taxation and research publications on farmer taxation. The research has involved verification of compliance of the farmer taxation systems in the EU countries with the principles of optimal taxation and identification of issues in Lithuanian farmer taxation. The methodology for optimisation of taxation system has been designed pursuant to the theoretical concept. Empirical study on the Lithuanian farmers’ farms has been conducted on the basis of the methodology and is built on the accounting data for the period 2009–2013. Two main indicators have been used for farm sampling: economic size of the farm defining its production potential and type of farming defining its specialization.[...]