2021.05.24 08:00

Expensive cars spark discussions of luxury tax in Lithuania

Augustinas Šemelis, LRT TV, LRT.lt2021.05.24 08:00

Conspicuous consumption has not been hit during the pandemic, leading some politicians to suggest that Lithuania may need a tax on luxury.

Luxury cars have been the most conspicuous signs that some were spared economic hardship during the pandemic.

“Last year we sold 50 cars and we're planning to sell as many in 2021,” Bentley Vilnius director Evelina Avina told LRT TV.

In most cases, luxury cars are owned by business firms, only rarely are they registered by individuals, according to Regitra.

Last year, Lithuanian companies registered more than 1,200 cars valued above 50,000 euros, spending over 100 million on luxury vehicles. The figures are not much different from those of 2019, indicating the pandemic had little effect on luxury.

Figures this year indicate that businesses are buying luxury cars at an even faster rate, sparking discussions about potential misuse of the government's financial support.

“Can it be that firms that have reported losses due to the pandemic and received taxpayer support are spending that money on luxury cars?” said conservative MP Mykolas Majauskas who chairs the parliamentary Committee on Budget and Finance.

MPs have also been raising questions whether luxury cars owned by firms are actually used for business. Instead, their owners could be buying vehicles for personal use, but registering them under their companies to claim tax refunds.

“There are gaps [in the law] that may be incentivising organisations to spend on luxury in order to cut their tax bill,” according to Majauskas.

The State Tax Inspectorate (VMI) has recently conducted checks in a dozen firms over misregistered cars and ordered them to pay some 90,000 euros in taxes.

More generally, tax authorities have found that some 70 firms have failed to pay up 1.5 million euros by declaring personal consumption as business expense.

“Business managers and owners are using company funds to satisfy their private needs and to avoid paying taxes,” says Rolandas Pancevičius, a VMI spokesman.

The findings have sparked discussions in parliament about the need for a tax on luxury cars.

However, Rūta Bilkšytė, a vice minister of finance, is sceptical: “It would be strange to introduce a tax that would apply to a thousand cars.”

A more universal wealth tax would be a more sensible solution, she said.

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