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Europe & Central Asia

Lithuania risk report

Updated:

Corruption is a moderate impediment to business in Lithuania, but small and medium enterprises (SMEs) can be vulnerable to bribery and extortion, largely due to the pervasiveness of red tape and inefficient government bureaucracy. Public procurement and public services are the sectors most affected by corruption, and the countryโ€™s shadow economy undermines fair competition. The Criminal Code criminalises corruption in the public and private sectors, covering abuse of office, money laundering, active and passive bribery and the bribery of international civil servants and foreign government officials, but anti-corruption laws are not effectively enforced. High-level corruption is a problem as officials act with impunity. Companies indicate that facilitation payments and bribes are sometimes requested when in contact with some public officials or to obtain favourable judicial decisions. Gifts are regulated under Lithuanian law.

Judicial system High risk

The judiciary in Lithuania carries a moderately high risk of corruption. Companies perceive that bribes and irregular payments are frequently exchanged to obtain favorable judgments (GCR 2015-2016). Around a third of companies and Lithuanian citizens report they perceive the independence of courts and judges as bad (JS 2017). One in ten Lithuanian judges indicate they have faced inappropriate pressure to decide a case in a certain way (ENCJ 2017). Companies rate the efficiency of the legal framework when it comes to settling disputes and challenging regulations as poor (GCR 2017-2018). In terms of clearance rate and disposition time, the Lithuanian court system performs efficiently (SGI 2017). The time required in Lithuania to enforce a contract in the court system is significantly below the average among OECD high-income countries (DB 2018).

Businesses can settle commercial disputes either through local courts or the Commercial Court of Arbitration (ICS 2017). International arbitration and foreign court judgments are recognized and can be enforced (ICS 2017). Lithuania is a party to the International Centre for Settlement of Investment Disputes (ICSID), the New York Convention 1958 (UNCITRAL) and the World Bank's Multilateral Investment Guarantee Agency (MIGA).

Police Moderate risk

Companies contend with moderate corruption risks when dealing with the security sector in Lithuania. Half of Lithuanians believe corruption is widespread among police and customs agents (EB 2017). About one in twenty Lithuanians indicate they have paid a bribe to road police in the past twelve months (GCB 2017). The government has effective mechanisms in place to punish corruption (HRR 2017) and companies find the Lithuanian police force to be moderately effective in protecting them from crime and enforcing the rule of law (GCR 2017-2018).

Public services High risk

There is a moderately high risk of corruption when dealing with Lithuania's public service. Nearly three-quarters of businesses indicate that they perceive bribery or the use of connections to be the easiest way to obtain certain public services (FEB 2017). Two out of five Lithuanians indicate they believe corruption is widespread among officials issuing building permits (EB 2017). Small and medium businesses have in particular reported the need to make facilitation payments in order to obtain permits on time (ICS 2017). Inefficient government bureaucracy is cited as the second most problematic factor for doing business in Lithuania (GCR 2017-2018). Businesses complain that the interpretation of regulations is unclear and that application is inconsistent (ICS 2017). They also complain that new legislation is often implemented without enough notice or proper public consultation (ICS 2017); legal certainty also suffers from the mixed quality and complexity of legislation in Lithuania (SGI 2017). Lithuanian politics are frequently plagued by corruption cases; four out of six parliamentarians faced corruption allegations in 2016 (NiT 2017).

The time and cost required to start a business are lower on average compared to other OECD countries (DB 2018).

Land administration Moderate risk

Corruption represents a modest risk for companies dealing with Lithuania's land administration. Companies are not entirely satisfied with the protection of property rights (GCR 2017-2018). A majority of Lithuanians believe that officials issuing building permits are corrupt (EB 2017). However, only a tiny fraction of Latvian companies indicate that they have been asked for a bribe in the process of applying for a building permit (FEB 2017). Expropriation is permitted under Lithuanian law to serve the public need, but only in return for fair compensation at market value (ICS 2017).

The time and cost required to register property in Lithuania are significantly below the average among OECD high-income countries (DB 2018).

Tax administration Moderate risk

Lithuania's tax administration carries a moderate corruption risk for businesses, stemming mostly from tax evasion and unpredictable government policy rather than bribery. Companies indicate that bribes and irregular payments when making tax payments are uncommon (GCR 2015-2016). About one in seven Lithuanians view tax officials as corrupt (GCB 2017). However, tax evasion is common (SGI 2017); about one in six Lithuanians businesses perceive tax fraud and non-payment of VAT to be among the most common corrupt practices in the country (FEB 2017). The European Commission has estimated that the VAT gap in 2015 amounted to more than a billion euros, representing more than a quarter of expected VAT revenue (VAT GAP 2017). The lack of open and transparent information in the tax sector is a problem, and small and medium enterprises (SMEs) occasionally face problems from public officials who treat small businesses as potential tax evaders (ICS 2017). Companies spend significantly less time on paying taxes in Lithuania compared to other OECD high-income countries (DB 2018).

Dainoras Bradauskas, former head of the Lithuanian State Tax Inspectorate, was removed from his position in February 2017 after allegations came to light that he improperly exerted influence on financial inspections of two of Lithuania's largest business groups, MG Baltic and Vilniaus Prekyba (VZ, Feb. 2017).

Customs administration Very low risk

Lithuania's customs administration carries a low corruption risk for businesses. Companies report that bribes and irregular payments in the process of customs procedures are fairly rare (GETR 2016). Companies indicate they are satisfied with the time predictability and efficiency of the clearance process (GETR 2016). However, half of Lithuanians believe corruption is widespread among police and customs agents (EB 2017). The time and costs required to comply with import and export regulations are significantly higher than in other OECD high-income countries (DB 2018).

Public procurement High risk

Public procurement carries a moderate to high corruption risk for business operating in Lithuania. Businesses have complained that the procurement process sometimes involves corruption and that there is a lack of transparent and open information on procurement processes (ICS 2017). Companies indicate that they perceive that bribes and irregular payments are commonly exchanged in the public procurement processes (GCR 2015-2016). About a quarter of companies believe they have lost a public tender due to corruption, which is in line with some of the better performers in Europe (FEB 2017). Companies also perceive diversion of public funds and favoritism in the decision of public officials as common (GCR 2017-2018). Some of the corruption risks include a broad definition of confidentiality in procurement documentation and the absence of a guide on red-flagging mechanisms (EUACR 2014). Contracts with a value below the national threshold are allowed to be changed after a contract has been signed; tenders under this requirement amount to 98 percent of bids (EUACR 2014). Single-bidder contracts are also a common concern in Lithuania (Opentender 2017).

The government has effectively implemented e-procurement, providing businesses with online access to centralized data on public procurement; as a result, almost 90 percent of public bids were conducted electronically in 2016 (ICS 2017). While Lithuania's Public Procurement Office is professional, it only has the capacity to thoroughly evaluate 3.4 percent of high-value public procurement (Transparency International, Apr. 2017). Companies are recommended to use a specialized public procurement due diligence tool to mitigate public procurement corruption risks in Lithuania.

Legislation

Lithuania's anti-corruption legislation is well developed, however, the government does not apply the laws effectively (HRR 2016). The Criminal Code criminalizes corruption in the public and private sectors, abuse of office, money laundering (also covered by the 1997 Act on Prevention of Money Laundering), active and passive bribery and trading in influence. It also provides for criminal liability for bribery of international civil servants and foreign government officials. A bribe, according to Lithuanian law, covers material and immaterial benefits, as well as benefits offered through a third party. The government extended the statutes of limitation for corruption offenses (EUACR 2014). Lithuania joined the OECD Anti-Bribery Convention in 2017; the OECD commended the country for making significant efforts to combat foreign bribery and the high quality of its legislative framework (OECD 2017). The intergovernmental group did urge Lithuania to further strengthen its prosecutorial capacities (OECD 2017). The Law on the Adjustment of Public and Private Interests in the Civil Service regulates conflicts of interest and is considered fairly strong (EUROPAM 2017). Other anti-corruption laws include the Prevention of Corruption Law and the Law on the Special Investigation Service (EACSiL). Giving and receiving gifts is criminalized in Lithuania, and public officials are not allowed to accept protocol gifts that exceed EUR 29; gifts that do not give rise to conflicts of interest yet exceed the amount of EUR 145 have to be reported (GRECO 2015).

Lithuania has ratified the United Nations Convention against Corruption (UNCAC), the Council of Europe Civil Law Convention on Corruption, the Criminal Law Convention on Corruption, and the Additional Protocol to the Criminal Law Convention on Corruption.

Civil society

Freedoms of speech and of the press are guaranteed by Lithuania's constitution, and these rights are respected in practice (HRR 2016). The media can express different perspectives without restriction, yet libel and defamation are considered crimes (Media outlets are mainly privately owned, but opaque ownership affects their independence, accountability, and reliability (FotP 2015). There are no limits on media concentration in Lithuania, which has created a situation in which powerful media groups are affiliated with companies in other industries (NiT 2017). WikiLeaks released information through the Telegraph on the extent of corruption in media advertising in Lithuania, noting that certain politicians were threatened with negative coverage by large newspapers, such as Respublika and Lietuvos Ryta, to obtain advertising revenue (FotP 2015). Politicians can get positive press coverage in return for money (FotP 2015). Access to public information in Lithuania is regulated by the Law on the Provision of Information to the Public and the Act on Right of Access to Information from State and Local Authority Bodies, and the government generally provides access to the requested information (FotP 2015). There are no restrictions on internet sites, and the press environment is considered 'free' (FotP 2017).

Freedom of assembly is guaranteed by Lithuanian laws and is respected by the government (HRR 2017). Civic groups are free to form non-governmental organizations (NGOs) and do not face obstacles in the process of registration (FitW 2016). The capacity of NGOs in Lithuania to produce well-crafted and relevant policy proposals varies, with business interests generally being more able to formulate policies that other groups (SGI 2017). The anti-corruption NGO 'White Gloves' was launched by a group of young Lithuanians, with its main purpose to fight political corruption on a national level.

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