2019.12.05 14:14

Government backtracks on bank tax, proposes additional corporate levies in Lithuania

Lithuania's government has backtracked on the planned banking asset tax and has proposed introducing an additional 7 percent corporate tax for banks instead.

Previously, the ruling bloc in the parliament proposed to tax the assets of banks, credit unions and other lenders worth over 300 million euros. The measure was expected to generate between 50 million and 60 million euros in additional budget revenue annually.

The alternative hike in corporate tax would raise the rate the current rate to 22 percent.

An exemption would apply to the tax on profits below 2 million euros. This way the government wants to ensure that interest rates and the prices of banking services won't go up.

Read more: Lithuanian cabinet backs retail, bank taxes

Finance Minister Vilius Šapoka says "this option is better" than the previously proposed banking asset tax.

"This alterative is non-discriminatory and will have considerably less negative consequences," the minister said in the parliament on Thursday.

MP Mykolas Majauskas, a member of the parliamentary Committee on Budget and Finance, representing the opposition conservative Homeland Union – Lithuanian Christian Democrats, told BNS that the new proposal is "considerably better than the one on taxing banking assets".

"Banks obviously have resources and can additionally contribute to the state's wellbeing, as the profitability of Lithuanian banks is twice higher [than in banks] operating in the majority of other eurozone countries," the lawmaker said.

The banks will have less chance of evading corporate tax, rather than a tax on turnover, he added.

The corporate tax in Latvia now stands at 20 percent, therefore, Lithuania would not stand out with a tax rate of 22 percent, Majauskas said.