Eurogroup agrees Lithuanian draft budget not as risky as EC believes

The Eurogroup notes the growth of Lithuania’s economy, which has been slowing down due to objective reasons, and its deflation environment.

In the view of the EC, Lithuania’s economy level is higher than its potential, while the Ministry of Finance, Bank of Lithuania, International Monetary Fund and the Organisation for Economic Co-operation and Development say that the country’s economy has not yet reached its full potential. Therefore, the measures included in the 2016 budget to promote economic growth are reasonable.

The Eurogroup was very positive about tax administration improvement programmes carried out in Lithuania and the country’s plans to continue these measures in 2016.

In its assessment of the 2016 DBP of Lithuania, the EC also expressed an opinion that there exists a risk of deviation from the structural general government balance indicator and proposes that measures be taken so that management of public finances continues to meet the provisions of the EU Stability and Growth Pact. The EC also emphasizes that such a conclusion was formed before taking into account the effect of the tax administration reform being implemented by the Government. The EC also notes that recently in Lithuania a number of measures have been put forward to strengthen tax administration; in particular, the EC highlights a better VAT collection measure to identify risky transactions between business entities introduced in mid-2015.

The EC in its conclusion also emphasizes that the 2016 DBP of Lithuania foresees reduction of the tax burden on labour. It is done by increasing the non-taxable income rate to improve the financial status of low-income individuals, the Ministry of Finance of Lithuania said.