Constitutional court rules against cap on income tax share for Vilnius

“I am glad that the Constitutional Court made the right decision. It was stated that allocating a lower share of personal income tax to Vilnius without any criteria was unlawful. This means that Vilnius is to be given a fair, higher share of the personal income tax,” Vilnius Mayor Remigijus Šimašius said on his Facebook page.

The capital city currently is allowed to keep 48 percent of the personal income tax collected in the city.

A group of lawmakers turned to the Constitutional Court in 2012, saying that the limit, which was set at 40 percent at that time, not only undermined the interests of the city and its people, but also harmed the image of the country as a whole.

Vilnius Regional Court has also turned to the Constitutional Court as part of its examination of Vilnius Council’s request to increase the share of the personal income tax left to the city to 60 percent.

Existing law allows leaving 94 percent of personal income tax revenues to Kaunas, 86 percent to Klaipėda, 99 percent to the district of Mažeikiai and 100 percent to all other municipalities.

Less politics

The Lithuanian Constitutional Court’s ruling calling for clear regulation of the allocation of personal income tax revenues to local authorities may help depoliticize this issue, Gitanas Nausėda, advisor to the president of SEB Bankas, said on Thursday.

“I agree that it would be very good if decisions to limit the share of personal income tax going to one or another local authority were based on certain objective criteria, rather than on some subjective considerations. If such a system of criteria were developed, that would be another step toward depoliticizing these decisions,” he told BNS.

The economist believes that Vilnius’ share of personal income tax should be higher than the current 48 percent of the revenues collected in the city.

“I think that Vilnius’ share should be higher. But nobody can say today if it should be 54-55 percent or 49 percent,” he said.