Banks operating in Lithuania posted a record profit of €1 billion last year, prompting renewed political debate over whether to extend the so-called solidarity tax, a levy on windfall profits in the sector.
The proposal, supported by Remigijus Žemaitaitis, leader of the ruling Nemunas Dawn party, would extend the temporary tax for another three years. Under the current framework, banks are expected to contribute a total of €600 million over the three-year period – nearly 1% of the country’s annual gross domestic product.
“This is shocking information. I believe it amounts to a culture of mockery by these banks in Lithuania,” Žemaitaitis said in response to the financial results.
Fourteen out of 19 banks in Lithuania reported profits last year, with total earnings surpassing the previous year, when profits approached the €1 billion mark.
“If they weren’t paying the solidarity tax, profits would have reached around €1.3 to €1.4 billion,” Žemaitaitis added.
Kęstutis Kupšys, a member of the European Economic and Social Committee, criticised banks for profiting at the expense of consumers, estimating that each of Lithuania’s 1.2 million households effectively contributed €800 to bank profits.
“They’re simply skimming the cream because customers have nowhere else to go,” Kupšys said.
Bank Association President Eivilė Čipkutė acknowledged that 2023 profits were slightly higher due to increased deposits and loan volumes. However, Prime Minister Gintautas Paluckas criticised banks for doing too little to support small businesses.
“Lithuania leads the EU in rejecting loan applications from small enterprises,” Paluckas said. Some local mayors have also called on banks to improve accessibility for residents by opening more branches and installing additional ATMs.
Banks, however, argue that digital banking has reduced the need for physical branches.
Kupšys also warned that as long as banks can earn interest by depositing funds with the European Central Bank, they will have little incentive to compete for retail customers or increase lending.
“With a guaranteed business model like this, why bother with risky lending?” he said.
Žemaitaitis said he is preparing legislation to include an extension of the “solidarity tax” in the upcoming fiscal package. “I’m finalising the draft and will absolutely propose an extension,” he confirmed.
The banking sector has pushed back against the proposal. “We firmly oppose any continuation of this tax,” said Čipkutė. “It’s important to remember that financial institutions are already subject to discriminatory tax rates.”
Banks in Lithuania currently pay a higher corporate tax rate than other businesses – 21%, up from 20% last year.
The current year is the last under the existing solidarity tax legislation. The levy was introduced by the previous government after the European Central Bank’s interest rate hikes led to windfall profits enjoyed by commercial banks. The 60% tax applied to the net interest income that was above the average of the four previous years by more than 50%.
The proceeds were used for military infrastructure.
Simonas Krėpšta, deputy chairman of the Bank of Lithuania, noted that banks will have contributed approximately €600 million toward national defence over the full three-year term.
Still, PM Paluckas questioned the tax’s effectiveness. “The solidarity tax is only triggered by exceptionally high profits, so it doesn’t always apply,” he said.
Lithuanian banks have lodged a complaint with the European Commission, arguing that the tax – introduced as a temporary measure and already extended once – distorts competition. The Commission has yet to issue a decision.
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