Lithuania’s tax revenue as a percentage of GDP is currently one of the lowest in Europe. The IMF considers that Lithuania could increase government revenues by making improvements to tax on wealth and capital and by broadening the scope of value added tax (VAT), while at the same time cutting VAT rates.
The IMF proposals include widening the tax base for residential property by decreasing the tax exempt threshold. It has also recommended an annual tax on motor vehicles based on the capacity of the engine. Further revenue could be collected by improving the inheritance and gift tax. Other revenue could be raised by strengthening the corporate income, eliminating exemptions and tightening the legislation. The preferential rate for small companies could be scrapped and the six year tax relief in the free economic zones could be reduced, according to the IMF. Individual income tax could be extended to cover pension payments and the capital gains tax exemption for housing could be restricted.
