Statutory, Effective and Optimal Net Tax Schedules in Lithuania

Nerijus Černiauskas and Alain Jousten

No 72, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: We estimate effective and optimal net income tax schedules and compare them to estimated statutory rates for the case of Lithuania in the period 2014-2015. Values of effective net tax rates are estimated from the survey of EU Statistics on Income and Living Conditions, the statutory net tax rates are estimated with the European tax-benefit simulator Euromod, while optimal net taxes are calculated via Saez (2002) methodology. We find that the three net tax schedules are similar for employees in the middle of the income distribution. At the bottom of the income distribution, optimal net tax schedules suggest higher in-work benefits. The net tax schedules diverge substantially for the self-employed. At the top of the income distribution, where the majority of self-employed are concentrated, the self-employed are required to pay 15 cents less net taxes per euro than employees - and they effectively pay 29 cents less.

Keywords: Optimal tax schedule; effective tax schedule; statutory tax schedule; taxes; transfers; employees; self-employed; Lithuania (search for similar items in EconPapers)
JEL-codes: H2 H21 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2020-02-07
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-pub
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Journal Article: Statutory, effective, and optimal net tax schedules in Lithuania (2021)
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