2019.06.25 17:00

Lithuania prepared for challenges; should introduce taxes on real estate and cars – IMF

BNS2019.06.25 17:00

Lithuania's economy is stable and the country is better than ever prepared for challenges, according to the head of the central Bank of Lithuania and experts from an International Monetary Fund (IMF) mission.

According to IMF, however, previous recommendation to introduce real estate and car taxes in Lithuania remains and they should get closer to the EU average.

"We think that the reliance of the tax system on the labor taxes [...] is too high, and the system could be more efficient if some of that burden is passed to capital, wealth, real estate or environmental related taxes," said Borja Gracia, the head of the IMF mission to Lithuania.

Vitas Vasiliauskas, board chairman of the Bank of Lithuania, underlined on Tuesday the quality of preparation for possible challenges in the country is much better than a decade ago.

"My key message I took from the mission is the comparison of our preparation, if something happens, to that of 2008. And the key conclusion, with no doubts, is that the quality of preparation is totally different," Vasiliauskas told a press conference in Vilnius on Tuesday.

On the other hand, he underlined that the country's economy is slowing and that Lithuania should listen to the IMF's existing and the European Commission's recent recommendations.

"The opinions on economic slowdown and related challenges match. The recommendations are to get prepared for "what if" situations, and that is what we've been consistently doing so far. I would also add here the recent EC recommendations. So we have some "homework" to do as always, and, probably, is natural for an open and small economy," Vasiliauskas said.

Borja Gracia, the head of the IMF mission in Lithuania, also said Lithuania's economic state is viewed positively, adding that the country is better prepared for challenges than a decade ago when the last crisis broke out.

Nevertheless, he added, Lithuania needs to improve the education system for it to meet demographic changes.

"We think that long term challenges for Lithuania remain significant, particularly, regarding demographic dynamics and social disparity and poverty. Therefore, our emphasis is on policies that will increase productivity (...) In this regard, we believe that the education and health care reforms have so far failed to deliver the key aspects of the reform effort," Gracia said.

The IMF mission started its work in Lithuania on June 12, and its experts assessed Lithuania's economic and financial resilience.

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