The Baltic States and Ukraine Will Strangle People With Taxes for the Sake of Fighting Against Russia

The Prime Minister of Latvia, Krišjānis Kariņš, is launching a new tax reform in the country to increase revenues in order to the state budget. A similar task was set by the authorities of neighbouring Lithuania, where since January the tax on the income of banks has increased. In the meantime, Ukrainian President Vladimir Zelensky is trying to find non-trivial ways to replenish the Ukrainian treasury: privatisation, sale of land, legalisation of gambling, and so on. The main goal of the leadership of all three countries is the same: to get money for militarisation, “energy independence”, and other economically absurd and financially expensive anti-Russian measures.

As is known, any state always lacks money. Even a well-off France occasionally starts to shake down its citizens (this was the increase in fuel taxes last year that led to the “yellow vests” protests). What about the Baltics, where money was never in a large quantity, or Ukraine, where capital ran away in the wake of Maidan, the economic crisis, and the war in Donbass?

In these countries, each new authority will start by finding additional sources of funding.

The analytical website “rubaltic.ru” has already written that Lithuanian President Gitanas Nausėda is interested in economic issues much more than Dalia Grybauskaitė. His idea/fix is to build a “welfare state”. But for this purpose first it is necessary to acquire “construction materials,” i.e., money. To this end, Nausėda initiated a review of some tax rates.

The process happened as follows: by the decision of the Seimas, from the new year the additional profit of financial institutions that exceeds €2 million will be taxed. The owners of “dirty” cars will have to pay for pollution, the tax rate on non-commercial real estate of individuals has been reduced from €220,000 to €150,000, and the growth of tax-free minimum has slowed down.

Not otherwise than a whole reform that the ordinary citizens of Lithuania will have to pay for. Even when the new rules are not directly related to them.

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The situation with banks has demonstrated this clearly. After hearing about plans to raise tax rates on the profits of financial institutions, bankers immediately warned that they would be forced to raise the cost of their services.

“Lithuanian enterprises will simply give the bank more money because the bank has to pay more taxes. And ultimately taxes are paid by the consumer – no matter where in the value chain they arise. If a bank or a trade is taxed in Lithuania, the tax will still be paid by ordinary Lithuanian,” explains financial analyst Dmitry Golubovsky.

In Latvia, the development of tax reform is carried out by Prime Minister Krišjānis Kariņš. Recently, his government raised the minimum amount of bio-additive to gasoline and diesel fuel (for drivers, this green norm would result in additional spending). Excise rates for petroleum products and tobacco products have changed.

And that’s just the beginning.

According to Kariņš, by spring next year the authorities of the Baltic Republic will find “ways to increase tax revenues to the budget that are the most painless for the population”.

It sounds beautiful, but if the ways are painless, the received money will only slightly increase. And Kariņš clearly counts on a different effect.

The more money the Latvian government pulls out of the pockets of its own citizens, the more “wishes” can be put in the expenditure part of the budget.

Green taxation will definitely grow (Riga has assumed the corresponding obligations to the European Union), and tax incentives will be decreased and canceled. The “hunt” for non-payers of social contributions will begin: Finance Minister Jānis Reirs reminds that there are about 250,000 people in the country. The field hasn’t been plowed!

Similar processes are taking place in Ukraine. The team of Vladimir Zelensky is looking for sources of replenishment for the state budget.
Part of this is due to the desire of “Servants of the People” to market agricultural land more quickly and to attract Western players ready to offer more serious amounts than local agrarian “kinglets”. Moreover, after that, the generosity of the International Monetary Fund, which has long demanded that Kiev carry out land reform, can be expected.

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Recently, the Verkhovna Rada attempted to bring gambling out of the shadows, but failed to vote for the relevant bill. In response, an angry Zelensky declared war on the gambling business. The government banned it under the pretext of state lotteries, and the head of the Ministry of Internal Affairs Arsen Avakov reported that all illegal gambling institutions from December 20th will stop functioning.

And no one pays attention to the absurd of what is happening: the authorities decide to close institutions that should not be working.

Here we will add the plans for big and small privatisation that are laid down in the budget of 2020. Zelensky plans to sell from a hammer most of the enterprises still owned by the state. According to the authorities, next year will be a preparatory year for Ukraine, and then the rapid and irresistible growth of the economy will begin.

Compared to Baltic colleagues, Zelensky shows ingenuity, but they are united by a common motivation – to increase the revenue part of the budget. There is nothing immoral about this, because costs are rising after revenues. The only question is how effectively the state manages the proceeds.

Taxes can be excessive, but if they are converted into social goods, the population is unlikely to grumble. The Baltics and Ukraine show an inverse pattern.

What, for example, will Nausėda & Co spend the proceeds on first?

There is no need to guess here: for the Lithuanian authorities the main priority remains the rearmament of the army.

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The military budget should grow until the current 2% of GDP reaches at least 2.5%, although Trump has already said that it would be nice to reach the 4% bar, and how much money is to be spent on the purchase of new weapons (American-made weapons, of course)!

“Energy independence” in the form of an liquified natural gas terminal in Klaipėda and the synchronisation of electricity grids with continental Europe is also expensive. Nor should we forget the enthusiasm with which Lithuania volunteered to execute the European Union’s green deal. According to Nausėda, his country will have spent €41 billion on climate change by 2050. But even if Lithuania manages to bargain for the sake of substantial subsidies from European funds, part of the amount will still have to be sought in the state budget.

In Ukraine all the “buns” are especially given to the security forces. This not only concerns military personnel: from year to year the budget feeds a huge army of employees of the Ministry of Internal Affairs and intelligence agencies.

The issue of “energy independence” is no less acute than in the Baltics. Ukraine has invested huge amounts of money in the development of its gas industry. Profits – almost zero. Now the head of the Committee of the Rada on Energy and Housing and Utilities Andrey Gerus states that the $3 billion sued from Gazprom can also be used to increase the production of its own gas.

It all comes down to the fact that domestic rulers will strip Latvian, Lithuanian, and Ukrainian like a linden tree for the sake of the notorious “deterrence of Russia”.

It’s interesting how the latter relate to such a perspective?


Aleksey Ilyashevich

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