Taxation and economic sustainability

Macroeconomic theory says that taxes play a repressing role in the economy. Introduction of new forms of taxation, the increase of tax rates and augmentation of tax income of the Government puts a downturn risk on consumption and therefore on economic growth. Knowing that, Governments start to compete with other countries by lowering corporate tax rates and trying to boost economic growth by using foreign investments. On the other hand Governments are pushed to lower personal tax rates in order to satisfy their electorate. It was highly believed that countries with lower tax rates have better prospects for future growth. However, small tax income boundaries government spending and might cause serious imbalances in economy. As the Irish example shows smaller taxes cannot guarantee sustainable growth of the economy. So the taxation and economic development relationship needs rethinking. This paper aims to test the efficiency of taxation in sustainable economic development terms and to discuss the factors that are the most important. The comparative analysis of EU countries is used for the research.Taxation; Economic Sustainability

Lithuanian export competitveness before economic recession

The research paper discusses the concept of competitiveness of economy and analyzes export as an indicator of it. The analysis is started by the historical review of export development. Statistical data show that three Baltic countries have been following different path of export growth since Russian crisis. Different export market orientation and manufacturing sector’s longer reorientation process provide an explanation. Furthermore, the historical analysis shows that export growth relation with foreign demand growth and GDP growth is not as strong as it might be expected. In order to estimate possible long-run GDP growth prospects, the structural analysis of trade is performed. The conclusions of the latter revealed high dependence of trade on conjuncture in foreign markets and supported the need of further price and non-price competitiveness analysis. Surprisingly, the results of the former indicate that price indicators do little to explain export development. Conversely, the results of the latter, based on CMSA methodology, show that market orientation of Lithuanian exports adds the most to its competitiveness; meanwhile the product orientation is generally unfavorable. Finally, the relation between FDI structure by countries and trade flows of processed industrial supplies is analyzed. Although data analysis does not reject the existence of such hypothesis, a more detail analysis should be conducted in the future