<abstract xmlns="http://www.w3.org/1999/xhtml"><p>We estimate effective and optimal net income tax schedules and compare them to the estimated statutory rates for the case of Lithuania for 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, whereas optimal net taxes are calculated via <xref ref-type="bibr" rid="j_izajolp-2021-0005_ref_043">Saez (2002)</xref> 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.</p></abstract>

We estimate effective and optimal net income tax schedules and compare them to the estimated statutory rates for the case of Lithuania for 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, whereas 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.

Statutory, effective, and optimal net tax schedules in Lithuania

Faculty of Economics and Business Administration

Faculty of Law, Tax Institute and HEC Liège

IZA Journal of Labor Policy

This work is licensed under the Creative Commons Attribution 4.0 International License.

{"article-title":"Statutory, effective, and optimal net tax schedules in Lithuania"}

We estimate effective and optimal net income tax schedules and compare them to the estimated statutory rates for the case of Lithuania for the period...

Statutory, effective, and optimal net tax schedules in Lithuania

Published Online: Jun 19, 2021

Page range: -

Accepted: Feb 16, 2021

DOI: https://doi.org/10.2478/izajolp-2021-0005

Keywords
Optimal tax schedule, effective tax schedule, statutory tax schedule, taxes, transfers, employees, self-employed, Lithuania

© 2021 Nerijus Cerniauskas et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Statutory, effective, and optimal net tax schedules in Lithuania

Published Online: Jun 19, 2021

Page range: -

Accepted: Feb 16, 2021

DOI: https://doi.org/10.2478/izajolp-2021-0005

KeywordsOptimal tax schedule, effective tax schedule, statutory tax schedule, taxes, transfers, employees, self-employed, Lithuania

© 2021 Nerijus Cerniauskas et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Optimal tax schedule, effective tax schedule, statutory tax schedule, taxes, transfers, employees, self-employed, Lithuania