Finance ministry moves to raise excise duties and expand property taxation

The Lithuanian Finance ministry proposes to raise excise duties on strong alcohol, tobacco and fuel, and expand the taxation of households’ non-commercial real estate in a move that is expected to bring an additional 61.5 million euros into the state's coffers next year.

The draft tax-related amendments have been made available to the public and interested institutions for discussion and will later be tabled to the Cabinet along with next year's draft budget, the ministry said.

It proposes to increase excise rates for ethyl alcohol (10.5 percent), gasoline (7.3 percent), and diesel fuel (7.2 percent), including that used in agriculture (44.6 percent), and heated tobacco products (65 percent) to generate an estimated 53.5 million euros in additional budget revenue.

If approved by the parliament, the hikes could lead to average price increases of around 0.45 euros per 0.5 liter of strong alcoholic drinks, 0.04 euros per liter of gasoline, and 0.03 euros per liter of diesel fuel, and 0.33 euros per 20-unit pack of heated tobacco products.

The ministry has also drafted amendments to the Law on Real Estate Tax that call for broadening the tax base for commercial real estate owned by private individuals.

It proposes to lower the threshold above which a non-commercial property is subject to the tax to 100,000 euros, from the current 220,000 euros, and raise the minimum tax rate for commercial real estate to 0.5 percent, from the current 0.3 percent. These changes are expected to bring in an estimated 8 million euros in additional revenue for the central government and another 1.2 million euros for municipalities.

If the measure is approved, the number of households subject to the tax will rise to around 37,000, including some 26,000 in Vilnius, from just 3,500 currently.

The package includes an amendment to the rules for calculating the tax on agricultural land. It could generate up to 7 million euros in additional municipal budget revenue.

The ministry also backs in principle an amendment, tabled by certain MPs, to the Law on Personal Income Tax that calls for reducing the rate at which the non-taxable personal income threshold will be raised in 2020-2021, and increasing the progressive tax rate to 32 percent, from the current 27 percent. The measure would increase revenue from the personal income tax by an estimated 78 million euros.