Lithuania's Coalition Weighs VAT, Income and Vehicle Tax Changes to Boost Budget Revenue
Lithuania's governing coalition working group discussed a higher VAT, a more progressive personal income tax and an annual vehicle pollution tax last week. No decisions have been made, and the coalition council is due to hear the group's findings on Wednesday.
A tax working group of Lithuania's governing coalition discussed raising value added tax (VAT), making personal income tax (PIT) more progressive and introducing an annual vehicle pollution tax at a meeting last week, as politicians search for new state budget revenue, LRT.lt reports. No decisions have been taken, and the group's final findings are due to be presented to the coalition council on Wednesday.
What was discussed
Algirdas Sysas, a Social Democrat who chairs the Seimas Committee on Budget and Finance, said the group talked about raising reduced VAT rates and asked the State Tax Inspectorate to run the numbers. It also considered taxing the wealthiest people more through PIT. In his words, Lithuania has the lowest PIT rate for top earners in the European Union.
Committee members Tomas Tomilinas and Aušrinė Norkienė said such measures were unrealistic in Lithuania. Norkienė said all options had been discussed but nothing decided. Tomilinas urged people to wait until Wednesday and said there were many alternatives.
The figures
Lithuania's standard VAT rate is currently 21%, with reduced rates of 5% and 12%. The Finance Ministry expects VAT revenue to reach €8.328bn in 2027. In theory, a one-percentage-point rise could yield an extra €397m, though lower consumption would need to be factored in.
A PIT reform adopted by Gintautas Paluckas' government in 2025 has applied since 2026, with rates of 20%, 25% and 32%. Tomilinas said his proposal to raise gambling taxes would bring in about €36m. A 2022 Environment Ministry proposal for an annual vehicle use tax, rejected by the Seimas at the time, was also revisited; it was estimated to raise around €170m a year.
The budget picture
Under the current draft, consolidated budget revenue in 2027 is expected to total €37.67bn against expenditure of €41.87bn. The Finance Ministry forecasts a public sector deficit of 3.8% of GDP next year, while the National Audit Office says it could approach 6% by 2029.
