The Lithuanian parliament Seimas on Thursday adopted a package of the so-called defence taxes, aimed at increasing the funding of national defence to 3 percent of GDP.
To achieve this goal, the parliament increased the corporate tax rate and excise duties on alcohol, cigarettes, and fuel, as well as adopted the so-called Defence Fund Law.
The Seimas also decided that local governments would contribute 25 million euros annually to civil protection projects from their share of personal income tax proceeds.
The Defence Fund will be used to accumulate funds to cover the most urgent needs of national defence capabilities and civil protection reinforcement.
The law establishing the fund was adopted, with 107 MPs voting in favour, two against, and 18 abstentions.
“This is the best investment in peace,” Finance Minister Gintarė Skaistė said.
She stressed that “there is a strong signal” that there is political support for such defence funding.
“This year we will be able to take decisions on acquisitions, to allocate money for advance payments,” the minister added.
Amendments to the Law on Excise Duties, which would increase taxes on alcohol and tobacco, were adopted, with 116 MPs voting in favour, none against, and five abstentions.
The excise duty rates on alcoholic beverages and tobacco products set by the Seimas will apply from 2025 to 2027.
Excise duties on fuel were increased, with 67 MPs voting in favour. Annual increases in some of these excise duties are foreseen until 2028–2030.
As proposed by the government, the Seimas increased the corporate tax rate by one percentage point to 16 percent. For small businesses, it would rise by the same margin to 6 percent.
The respective amendment to the Law on Corporate Income Tax was adopted, with 118 MPs voting in favour, two against, and eight abstentions.
However, the parliament did not support the proposal by Lukas Savickas and Algirdas Butkevičius of the Democrats “For Lithuania” to increase the corporate tax rate to 17 percent.
Economy and Innovation Minister Aušrinė Armonaitė said that an even higher corporate tax rate would be detrimental to economic growth.
“Let’s protect our investment climate,” she said.
As decided by the Seimas, 4.1 percent of excise revenue will be transferred to the Defence Fund in 2025, 7.1 percent in 2026, and 7.4 percent in 2027 and beyond.
Politicians in Lithuania want to boost defence funding to speed up the establishment of a military division, to host the German brigade assigned to Lithuania, which is expected to be fully stationed in the country by 2027, and to prepare for universal conscription.
Newsletter
Every Friday morning.
