The Lithuanian Ministry of Finance proposes to scrap a VAT exemptions for district heating, saying that a draft state budget for 2015 earmarks sufficient funds to compensate low-income families for increased heating bills.
Ministry of Finance
© DELFI / Valdas Kopūstas

Heating is currently taxed at 9 percent, well bellow the standard rate of 21 percent.

In planning next year's budget revenues and expenditures, the ministry took into account that the existing VAT exemption for heating expires at the end of this year and, therefore, earmarked additional funds for local governments to pay compensation to low-income families, Finance Minister Rimantas Šadžius said in a press release.

The reduced VAT rate for district heating sparks discussions each year and the economists continuously call to scrap it and, accordingly, to generate more budget revenue.

Finance Minister, parliamentary speaker Loreta Graužinienė and some other politicians have said that the reduced rate is not fair in social terms and, therefore, should be abolished, in particular as the prices of natural gas and electricity are going down.

Unofficial sources have said that this measure would also have the support of President Dalia Grybauskaitė.

The standard VAT rate in Lithuania is 21 percent. Until the end of this year, district heating is subject to the reduced 9-percent VAT rate.

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