In Lithuania, it is allowed to divert a part of personal taxes to support athletes, it is not planned to be introduced in Latvia / Article

IN SHORT:

Rūta Bilkshtīte, the Deputy Minister of the Ministry of Finance of Lithuania, compares the chosen solution with the opportunity for everyone to become a decision-maker in the distribution of tax money.

“People have the opportunity to be like small Ministries of Finance, because tax diversion is the job of this ministry – to decide where to spend the collected taxes, therefore we give people the opportunity to decide where part of the taxes go,” Bilkshtīte told Latvian Television.

Every year, 29 million euros are distributed in Lithuania according to the opinion of the citizens. The system is quite simple: in the electronic declaration system, all you have to do is start entering the name of the organization, when already half way through the system offers it automatically and with a couple of clicks the matter is done.

“At the same time, it is important to mention that, for example, 1.2% can be divided so that the entire amount does not have to be donated to one non-profit organization,” explained Rūta Bilkshtīte. “You can also donate to a kindergarten, yoga studio or sports club – it’s up to everyone.”

Sports clubs have realized that such a tax system is a very good way to supplement their budget, so they are very active in attracting new members and fans.

The Ministry of Finance of Lithuania explained that this was also one of the goals of the tax system – to make organizations put in more effort and fight for people’s favor with a job well done.

“It is a great opportunity for all non-profit organizations to show their activities, because they are on the open market. Organizations should show their work, as well as the use of donations,” emphasized Rūta Bilkshtīte.

Latvia does not plan to adopt such a practice, and the Ministry of Finance states that donors already have their benefits.

“Individuals, when making donations to public benefit organizations, are allowed to recognize these expenses up to 600 euros per tax year as eligible expenses and include them in the declaration, and recover personal income tax, if the criteria established by law are met that the taxable person the income is high enough and the tax has been paid in a certain amount in the given period,” said Astra Kalāne, Director of the Department of Direct Taxes of the Ministry of Finance.

The Ministry of Finance considers the comparison with Lithuania to be rather philosophical, because in Latvia the emphasis is on the ability of a private person to decide for himself what amount to donate and to declare it later, rather than on incorporating an automatic percentage into the declaration system. The ministry also emphasizes tax credits for entrepreneurs who donate to public benefit organizations, including sports organizations.

“Legal entities can donate when they distribute dividends and calculate company income tax,” Astra Kaļane said. “You can donate in an amount that reduces the tax by as much as 85% of the donated amount, and this amount could be up to 30% of the calculated tax. This is a very high intensity of support specifically for legal entities.”

Since the tax reform implemented in 2018, the amount of donations to sports has decreased significantly.

Entrepreneurs are given the opportunity not to pay corporate income tax if the profits are invested in the development of the company, as a result of which they decide to donate to sports significantly less often.

For years, the leaders of sports federations have been calling for the development of such a tax policy so that businessmen would be more interested in donating to sports. The Ministry of Finance is working on new tax policy guidelines, but currently does not plan to raise the threshold for eligible expenses, nor does it plan to develop specific proposals for sports support. In order to possibly change the ministry’s mind, the sports industry should formulate its needs more loudly and concretely and develop its own proposals, which is not happening yet.