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2019.10.07 14:00

‘Pulling rabbits out of a hat’ – Bank of Lithuania chairman dismisses banking tax

LRT TV naujienų tarnyba, BNS2019.10.07 14:00

Proposals in parliament to tax banks have not been properly discussed and present real risks of rising interest rates on loans, according to Lithuania's central bank chairman Vitas Vasiliauskas.

“There just cannot be such sudden decisions. We need to consider all pros and cons,” he said on LRT TV Savaitė programme on Sunday, commenting on a tax on banks' assets currently considered by the ruling parties in Lithuania.

The head of the Bank of Lithuania also noted a high level of concentration in the country's banking sector where three major banks provide loans to the national economy. This makes it more likely that any tax on banks will translate into higher interest rates for households and businesses.

“A possible impact on interest rates, a possible impact on services and the prices of services in the existing concentration is, in my opinion, very real,” Vasiliauskas said.

He also said that touting new tax this late in the fiscal year was tantamount to “pulling rabbits out of a hat”.

“The government budget [drafting] process is coming to an end, and now we start pulling rabbits out of a hat. I am perfectly aware of the fact that the situation is complicated and there's really an increase in spending. It's obvious to me that all the proposals are intended to help balance the budget,” Vasiliauskas said.

The authors of the proposal to tax bank assets say it would bring additional 100 million euros to the state coffers. Prime Minister Saulius Skvernelis has commented that the figure would probably be lower.

The bill on taxing banks assets was drafted back in March 2016 by the Electoral Action of Poles in Lithuania – Christian Families Alliance, part of the ruling coalition. Banks' assets exceeding 100 million euros insurance companies' assets in excess of 50 million euros would be taxed at an annual rate of 0.4 percent.

Read more: Lithuanian banks hit back against proposed tax on their assets

Read more: Ruling party calls out ‘blackmail’ as Lithuania's banking association opposes bank asset tax

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