The influence of subsidies and taxes on economic viability of family farms in Lithuania

Astrida Miceikienė, Erika Besusparienė

Abstract: Family farms are eligible for various tax exemptions and subsidies in Lithuania. The goal of tax exemption and subsidies is to maintain family farm viability. Taxes and subsidies are the two closely interrelated fiscal policy instruments. Taxes and subsidies should not make double benefits for family farms, but should rather be applied to different areas. Unfortunately, the research by various researchers has shown that family farms receive double benefits thought tax exemption and subsidies.
The paper aims at assessing the impact of taxes and subsidies on the viability of family farms. To investigate the theoretical aspect of the economic viability of family farms, relation between subsidies and taxation, systemic analysis and synthesis of theoretical insights in the foreign and local scientific literature as well as the methods of induction and deduction have been applied. In this paper, the logistic regression model has been employed to estimate the influence of subsidies and taxation on economic viability of family farms.
As a source for raw data we used the Accounting Data network of farmer’s database. The research results have shown that the family farms which are viable by virtue of the subsidies, would be viable after eliminations subsidies. In cases of tax exemption, elimination and addition of the same taxes as for other business will have no significant impact on the viability of the family farms in Lithuania. Therefore, it could be assumed that the tax exemptions are superfluous and the subsidy regime is not effective in Lithuania for family farms.

Keywords: economic viability; family farms; subsidies; tax

Date published: 2020-02-26