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Cash register: a new warrior against the shadow economy

2011 started with an important decision for the Lithuanian Ministry of Finance. The Government accepted the act that by the 1st of May all vendors who are trading food products in closed structures will have to use cash registers.

The similar act has been suggested in the beginning of 2009, but then it was cast off, because the Ministry of Economy and the Lithuania’s Small Businesses and Traders Association agreed on a memorandum of understanding.

A mean to fight the shadow economy

One of the most important goals for Lithuania’s Government in 2011 is the extraction of 1 billion Lt from the shadow economy. According to the Ministry of finance: “the new order for the use of cash registers will ensure a better business transparency, revenue accounting control, create a possibility to record the revenues precisely and at the same time block a way for the unregulated shadow practices”.

Lithuania’s Prime Minister Andrius Kubilius noted that: “Cash registers are used all over the world, they are considered as a very effective way to fight shadow economy and contraband, and I promise that this government will use them.”

The Government expects to collect nearly 100 million Lt with the introduction of the cash registers.

All the technical trivia

Most of the vendors are confused with the new act and are afraid of the possible damage for their profit. However, the government says that they will do all that is in their power to avoid that.

First of all, the expenses for buying the cash registers will be compensated: 1000 Lt for buying a new and 500 Lt for a used cash register. These are the “ceiling” compensations for the market vendors who are going to purchase the cash registers required by the new act. Overall, nearly 3 million Lt are intended to impose from the Privatization fund.

Secondly, the vendors will have to pay the value-added tax only if their annual turnover reaches 100 thousand Lt and for the imported goods – 35 thousand Lt. Most of the market vendors do not reach this limit.

Thirdly, the Ministry of Finance promises that the accounting for the cash register users will be made as simple as possible – they will only need to print the daily report from the cash register. In addition, the usual bargain of the market shall not disappear, because the vendor will need to register the price that was bargained, not the initial one.

Finally, some of the vendors were afraid that the cash register will not work in the cold weather. The act stands only for the vendors who are working in closed structures which means that neither the machine, nor the fingers of the sellers will freeze.

Nevertheless, protest

The dissatisfied market vendors are going to protest near the Seimas on the 7th of February. The projected number of people is 10 thousand.

The Lithuania’s Small Businesses and Traders Association president Zita Sorokienė says: „We think of the new act very negatively. Unambiguously, this is an aggravation for the business conditions. Do they want a new wave of emigrants, a huge discontent among people?”

“It’s a paradox; the government which is resented with the supermarkets wants to change the vendor markets into them”, says Kaetana Leontjeva from the Lithuania’s Free Market Institute.

However, the most interesting question in this story stays unanswered. If the main reason the Government imposes this new act is the fight with the shadow economy – the extraction of 1 billion Lt from it, how the extracted money (in this specific case, projected 100 million Lt) will be calculated?

Last year economist Raimondas Kuodis spoke of the PowerPoint versus Excel politics in Lithuania. It seems that the saga continues.

EBN Reporter Edgaras Savickas