The Lithuanian parliament has voted in favour of the government’s proposal to introduce a “temporary solidarity contribution” payable by all banks and credit institutions, a levy that is expected to raise over 400 million euros amid soaring banking profits.
The Law on Temporary Solidarity Contribution passed in a vote of 103 to 12 with 13 abstentions on Tuesday.
The government has proposed the temporary tax as the country’s banks are this year forecast to make around a billion euros in combined profits, doubling them thanks to the ECB raising key interest rates.
Under the law, the levy will amount to 60 percent of banks’ net interest income that exceeds the four-year average by more than 50 percent.
Banks will have to raise interest rates on deposits and lower interest rates on loans in order to pay less.
Finance Minister Gintarė Skaistė has said that deposits held by the Lithuanian banking system currently exceed loans by 11 billion euros. The funds are held risk-free at the European Central Bank, she has noted, which pays interest to banks on their deposits.
Eivilė Čipkutė, president of the Association of Lithuanian Banks, has criticised the tax, saying on more than one occasion that it will distort competition in the banking market. According to Čipkutė, the Lithuania-based British online bank Revolut, one of the largest lenders, will not have to pay the tax, which will amount to an “unlawful state aid”.
Moreover, Čipkutė insists that the new levy violates the Constitution in that businesses are not given enough time to prepare for the tax.
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