The central bank governor believes that despite the geopolitical and economic uncertainty, Lithuania’s government should not delay tax reform.
According to Gediminas Simkus, the country’s tax system is still an “animal farm” – meaning, messy and conferring unjustified advantages to some – and it is in the state’s interest to put it in order.
“In our view, there are defects in our taxation system – we have a very large VAT gap, the property tax base is very narrow, and the country collects very little in the way of environmental taxes – these are a lot of things that can and should be corrected sooner rather than later,” Bank of Lithuania chief Simkus told reporters.
According to Simkus, the reforms could be introduced gradually, but the government should start preparations.
“We have to put the reforms on the table, discuss them and take decisions,” he added.
In Simkus’ view, the war in Ukraine and high inflation rates are not excuses for delaying tax reforms.
“There is always something going on, but we have to decide what is important for us as a country, because a well-functioning tax system is the basis for the soundness of our public finances,” Simkus said.
Simkus has previously called for a debate on property and environmental taxes, and he also opposed the proposal to extend indefinitely the value added tax (VAT) exemption for hotels, which expires this year.
Finance Minister Gintare Skaiste said in early October that the ministry had prepared a review of tax exemptions, but did not believe that it should be put forward for discussion and adoption in the current period of economic uncertainty. In September, the minister said that new taxes could be introduced from 2024 at the earliest, with the approval of political and social partners. (LRT/Business World Magazine)
