What has Lithuania’s ruling coalition decided to do on VAT rates?

Lithuania’s ruling coalition has said value-added tax rates will not be changed but that worker’s non-taxable income level will be increased to €310.

Order and Justice chairman Rolandas Paksas announced these plans after the ruling coalition’s council meeting on Tuesday.

“There was the most deliberation on the VAT – whether to reduce it for certain groups or overall. However, we decided on the principle that we should reduce social isolation, and we proposed to increase the nontaxable income to €310. We will return to the question of VAT in September,” Paksas said.

The non-taxable income level is currently at €200 and was last increased from €166 on 1 January.

“If we were to agree on it right now, the VAT exemption would only come into effect in December, so with next year’s budget. Tax changes come into effect six months after they are made. Another reason is that there are different positions on the changes proposed for product groups whose VAT should be reduced,” said Prime Minister Algirdas Butkevičius.

Butkevičius pointed out that the Social Democrats had proposed VAT exemptions for fresh and frozen meat, the Labour party had suggested it for Lithuania’s basket of vital products, and the Order and Justice party had proposed reducing the VAT from 21% to 18%.

“Now, a person receiving more money can decide for themselves if they’ll spend more on food products or if he’ll spend more on free time, recreation, tourism or something else,” said Butkevičius.