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Tuesday 23.01.2018 | Name days: Strauta, Grieta
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For cheaper groceries brother of Lithuania’s SD Party leader goes to Latvia

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Linas Jegelevičius for the BNN

The arrival of German grocery chain Lidl to Lithuania has trimmed the provisions prices in Lithuania, yet they would never reach the level of prices in the neighbouring Poland, claims Lithuanian Prime Minister Saulius Skvernelis. Meanwhile, the brother of Lithuania’s Social Democratic Party leader, Gintautas Paluckas, told BNN he goes for cheaper groceries to Latvia.

Upping prices have been a major topic of Lithuanian media and street chats alike for long now. Dismayingly to many they keep rising albeit Lidl has pulled them down, little though, over the last year.

Poland‘s border towns have long become Lithuanians‘ grocery shopping destinations – the prices over the border are lower approximately 10-20 per cent. Meanwhile, Latvia is getting increasingly popular with the dwellers in northern and western Lithuania.

Acknowledging that rise of prices is inevitable, Skvernelis expressed hope that further competition in the grocery market would reduce the prices further.

«Accession of a new market player (Lidl Lietuva) has had a really positive impact, however, this seems to be not enough. People of Lithuania should not expect prices for food products to be at the same level as they are in the neighbouring Poland. …This will never be the case, as they have economy of scale. Our national economy is indeed small, furthermore, businesses often want to have a profit margin,» Skvernelis told the national radio LRT this week.«Speaking about retail trade, especially food products, the only solution here can be arrival of new competition,» he added.

No newcomers are expected in the glutted grocery retail market any time soon. In fact, the first year of operations has been loss-making to Lidl. The German food giant posted loss of 18 million euro, which the company sees as investment with a long-term return.

Lidl opened 25 grocery marts throughout March 1, 2016- February 28, 2017, employing 1,200 sale persons, floor assistants and other personnel. Now the retailer operates 30 shops in Lithuania‘s 15 cities.

Maxima, the country‘s biggest food retailers, posted turnover of 1,413 billion euro last year, a 2.1 per cent drop against 2015.

With the politicians discussing what else could bring down exorbitant prices, most are focusing on the value-added tax (VAT).

Lithuania’s ruling coalition’s junior partner, Social Democrats (SD), suggest introducing a reduced VAT on main food products and have anew brought up the idea of progressive taxes.

«We want a discussion on VAT discounts. This is not necessary from 2018, we should not just take account of the growing income of people but also a stop on growing prices – we should start discussing VAT on main food products,» Andrius Palionis, elder of the party’s political group in Seimas, said after a meeting the ruling coalition’s political council on Wednesday, August 2.

In his words, the Social Democrats object the proposal of the other ruling party, the Lithuanian Farmers and Greens Union, to raise children’s money at the expense of discarding the additional tax-free income size. The Social Democratic Party wants children’s money to be at around 100 euros per month.

«If we cannot do this in 2018, we should commit ourselves to raising the sum annually to reach the 100 euros,» said Palionis.

The Social Democrats also suggest reintroducing free lunch for elementary school students and introduce progressive taxes.

Asked whether progressive taxes and a lower VAT would help reduce food prices -and poverty – in Lithuania, Danas Paluckas, head of the SD party’s Palanga town division, and also the brother of Gintautas Paluckas, the party’s chairman, told BNN he is convinced the measures would «play out» good in the striving.

«One of our key conditions for the Farmers and Greens, the ruling coalition’s senior partners, is that the party pursue the agenda it has committed to in the coalition programme – i.e., reform the existing tax system. Only if the Greens move forward with it, we will remain as the junior partner in the government. Unfortunately, it has not been done it until now,» Paluckas emphasised.

Reminded that the Social Democrats played the first fiddle in 2012-2016 government and failed to execute the tax system reform, he explained it by failure to strike accord on the issue of progressive taxes with the other coalition partners.

«Remember, in the beginning, the coalition consisted of four parties – this made things a lot more difficult. The Farmers and Peasants are now in a much better situation to carry out the reform. We will eagerly support them if they put their hands on it in the months to come,» Paluckas said.

He admitted to BNN that, for groceries, he goes to neighbouring Latvia. The Lithuanian-Latvian border is just 30 kilometres away from Palanga, a resort town.

«I do not hide it. The shopping there is way cheaper than in Lithuania. For example, salmon, a luxury item, costs there twice less than here. The same could be said about many other food products, and beverages, too,» the brother of the Lithuanian SD leader, confided.

Meanwhile, PM Skvernelis, says that the government will discuss the possibility of reducing the VAT tariff next year.

«Even this year I have repeatedly made suggestions to the Finance Ministry to discuss the possibility of lowering the general VAT tariff by at least one percentage point. However, risks of the step are significant. Therefore, we have agreed to next year look at the possibility of lowering the VAT tariff in 2019-2020, after we had implemented the current proposals on tax system reforms,» the PM said.

The 21-percent VAT tariff was established back during the financial crisis in an effort to ensure additional budget revenue, which were necessary to cut the fiscal deficit and ensure financial stability until the end of the downturn. Then government of Conservative Andrius Kubilius said that the VAT tariff would be only raised temporarily until the end of the financial crisis, however it remained.

However, Skvernelis admits that the value-added tax reduction expectations will not most likely result in lower food prices.

«A lower VAT tariff on food products would not have an effect, as buyers would not feel any impact,» he claimed.

According to data provided by Statistics Lithuania, the annual inflation stood at 3.5 percent in June, while average annual and monthly inflation were 2 percent and 0.2 percent, respectively.

Vitas Vasiliauskas, board chairman of the central Bank of Lithuania, said in late July that the prices may have been pulled up by the expiry of the reduced VAT tariff on heating and increase of excise duty on alcohol and tobacco in spring. He said prices would grow by an average of 2 percent next year.

Meanwhile, Lithuania’s Parliamentary Speaker Viktoras Pranckietis believes that the country’s inflation rate has been pulled up by higher beer prices and cancelled reduction of the value-added tax (VAT) on heating.

«We should probably agree that there were two steps – excise duty and especially beer excise. The inflation rate was largely caused by excise on beer. The other thing is VAT on heating, in other words, increase in heating prices after June 1. Of course, prices have increased considerably in the services sector,» Pranckietis told Žinių Radijas news radio on Wednesday morning.

In his words, the market lacks competition; however, the government cannot interfere with free market: «We need more retail chains to come. This would promote small-scale trading.»

Alarmingly to the ruling coalition, a new Eurobarometer survey shows that increasingly more Lithuanians think that the country’s economic situation has worsened.

According to the results, 26 percent of respondents described Lithuania’s economic situation as good in spring, which is a decline by 6 percentage points from last fall, the European Commission’s (EC) mission in Lithuania cited the Eurobarometer data.

Meanwhile, the percentage of those seeing Lithuania’s economy as doing bad went up by 6 points to 72 percent, while another 2 percent did not have an opinion on the matter.

Some 58 percent of those polled said the financial condition of their household was good, while 40 percent said it was bad.

Asked to specify the top problems of the country, 54 percent mentioned the growth of prices and inflation, 23 percent – taxes and 27 percent – the unemployment rate.

Ref: 020/111.111.111.4835


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  1. john says:

    I don’t imagine how the Balts make their ends meet with the salary of 600 euro. Feel sad for the people.

    Thumb up 0 Thumb down 0

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