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Wednesday 29.01.2020 | Name days: Valērijs, Aivars

Lithuania adopts state budget with higher corporate tax on banks

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Lithuania, state budget, Gabrielius Landsbergis, Vilnius, Seimas

The Lithuanian legislature has on Wednesday passed the state budget. It sets forth increasing the corporate tax on banks and new tax on polluting cars.

Lithuanian public broadcaster LRT reports that the bill was adopted by the votes of the ruling coalition: the Farmers and Greens Union, the Social Democratic Labour Party, the Electoral Action of Poles in Lithuania, and the group ‘For Lithuania’s Welfare’. Four opposition liberal MPs also voted for the budget, as have most non-attached members.

Promises or expectations

Opposition MPs found ways to express their disapproval during the debate. The conservative Homeland Union – Lithuanian Christian Democrats group donned their seats with posters saying «Don’t break promises». Raises to public sector workers’ pay were too small, they insisted, and not even close to what had been promised.

«Teachers, doctors, nurses – one could point at every social group the government promised something and didn’t deliver,» said conservative leader Gabrielius Landsbergis.

Social democratic MP Rasa Budbergytė said the bill was not socially just enough: «This budget does not even sufficiently target social exclusion, it does not tackle income inequality which is not going down in Lithuania.»

The prime minister said the problem was high expectations. «But it must be said that, today, expectations have been met and, importantly, we met the fiscal compact rules and will have a surplus in our budget,» Skvernelis evaluated.

Criticism of car tax

One of the most contested measures adopted on Tuesday was a tax of cars. The opposition booed during the vote, provoking indignation from some ruling bloc MPs.

The tax will come into effect in July and will be paid when registering a vehicle exceeding a certain CO2 emission level. The government calls it a pollution tax and insists it is necessary to cut CO2 emissions.

The authors of the bill estimate it will affect 200,000 people, though the opposition says the number will be twice as high. Most importantly, they insist it will weigh disproportionately on lower-income drivers and will not encourage switching to less polluting vehicles or public transport.

Higher banking taxes and risks

Another contentious move was the raising of the corporate tax rate for banks, from 15 to 20 percent. The highly concentrated banking sector in Lithuania enjoyed excessively high profits, the proponents of the measure said, and need to contribute more to social welfare.

Meanwhile parliament lawyers raised concerns that isolating one sector may violate constitutional principles of equal treatment.

Claiming that only banks and credit unions make excessive profits, but not other sectors – “someone might be selling fertilizer and making above-average profits» – is unconvincing, said opposition MP, conservative Ingrida Šimonytė.

«We simply don’t know, we need to find it out and it’s a constitutionally risky precedent, so I believe that the Constitutional Court should answer this question for us,» she said.

Most of the opposition, 48 MPs, voted against the bill, three abstained.

Prime Minister Saulius Skvernelis expressed delight with the result: «My prediction had been 82 votes, we had 85, which is a rather strong majority.»

The article originally appeared on LRT English:

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