aA
Reintroducing a reduced VAT rate on district heating and hot water services may hold back the government's planned tax reform, Swedbank Lithuania's chief economist Nerijus Mačiulis warned on Tuesday.
Heating
Heating
© DELFI / Kiril Čachovskij

The economist commented on a deal signed earlier in the day by the Lithuanian Farmers and Greens Union (LFGU) and the Homeland Union–Lithuanian Christian Democrats.

Under the deal, the ruling party pledged to bring back a reduced VAT rate on heating, which was scrapped on July 1, in exchange for the opposition party's votes in favor of the government's planned state forest management reform.

"One has to remember why the reduced rate for heating and other subsidies were discarded. (This was done) to raise the tax-exempt personal income threshold for people with low income and to put in place incentives for investment and entrepreneurship," Mačiulis told BNS.

"One has to understand that any tax reduction has alternative costs, and so does the VAT reduction for district heating and hot water. This means that the entire planned tax reform may hang in the balance, that the tax-exempt personal income threshold may not increase and that we may not see other positive tax changes," he said.

The economist said that the very deal that "puts totally unrelated things on one plate" looked strange to him.

Prime Minister Saulius Skvernelis said earlier in the day that the government would consider reintroducing a reduced VAT rate for heating and hot water, but added that it would not be 9 percent.

According to Mačiulis, the size of the rate does not matter as it would not make the tax system more transparent.

"I don't think the tax system would become more transparent or more efficient if we had a rate somewhere between 9 percent and 21 percent," he said.

The VAT rate on district heating and hot water services was raised from 9 percent to the standard 21 percent on June 1. It was estimated that the measure would bring an additional 30 million euros to the budget annually.

The planned state forest sector overhaul was expected to save 13 million euros per year.

|Populiariausi straipsniai ir video

Coronavirus emergency may mean restrictions, release from obligations for firms

The Lithuanian government's decision to declare a state-level emergency due to the coronavirus...

Finance minister: coronavirus to affect economy

The widening coronavirus outbreak will have implications for the Lithuanian economy , Finance...

Lithuanian businesses might feel coronavirus effect in spring

The coronavirus outbreak in China is already affecting Lithuanian businesses as some companies...

Leader in gaming and VR platforms to undergo major expansion in Lithuania

Unity Technologies , creator of the world’s most widely used real-time development platform for...

German polymer specialist establishing microduct systems production unit in Klaipeda

REHAU , a family-owned polymer specialist with annual sales of around EUR 3.5 billion, is...

Top news

1st coronavirus case confirmed in Lithuania (1)

The first coronavirus case was confirmed in Lithuania early Friday morning, the country's Health...

Hundreds of fans ask for refund of tickets to Zalgiris' Euroleague game

Several hundred basketball fans have asked for refunds of their tickets to the upcoming Friday game...

First Lithuanian coronavirus patient's family members undergoing tests

The Lithuanian woman, 39, who was diagnosed with the new coronavirus on Friday, evaded contact with...

Health ministry expands list of risky territories over coronavirus

Lithuania's Health Ministry has put Hong Kong , Iran, South Korea and Singapore onto the list...

Vilnius is 7th most accessible city in Europe

Vilnius came in 7th place beating many other European tourist hotspots.

|Maža didelių žinių kaina