With commercial banks looking to make around a billion euros in combined profits this year, Lithuania’s Finance Ministry has proposed to introduce a temporary 60-percent “solidarity” tax on them and use the proceeds for defence.
“We propose a temporary solidarity contribution the proceeds from which would go toward the increased needs of national defence,” Finance Minister Gintarė Skaistė told reporters on Thursday.
The levy would be charged on net interest income more than 50 percent above the average of the past four years.
The amount of the “solidarity contribution” for 2023 would be calculated based on net interest income for 2018-2021, and that for 2024 based on net interest income for 2019-2022.
It would be payable by financial institutions holding deposits of at least 400 million euros.
The levy would be in place for two years until 2025.
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“The key thing is that the solidarity contribution is aimed at only an unexpected and significant part of the net interest income increase and is temporary and will not cause negative consequences for the financial system, its stability, competitive environment and will not create inappropriate incentives,” Gediminas Šimkus, board chairman of the central Bank of Lithuania, said.
The tax is expected to raise 510 million euros.
Meanwhile, the Lithuanian military has highlighted its mobility needs. Addressing them would require 963 million euros, according to estimates.
Under the plan, the money raised from the tax on windfall profits would be used to fund the construction of a bypass road for military transport, the expansion and renovation of airports and the country’s seaport, the construction of logistics and loading bays, the expansion of significant roads near the Rūdninkai Training Area, the reconstruction of the highway near the Polish border, the renovation of bridges and viaducts, the construction of ramps and other necessary projects.
While the levy revenue would be enough to meet over half of the costs, the rest would be covered from EU funds, according to the Finance Ministry.
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