The European Commission could be more flexible on Recovery and Resilience Facility funds, Economy and Innovation Minister Ausrine Armonaite said on Thursday after the EU’s executive arm rejected Lithuania’s request to postpone until 2025 its RRF plan deadlines related to the tax reform.
Armonaite, leader of the Freedom Party, a member of the ruling coalition, noted that the situation in Europe and Lithuania has changed significantly over the past two years.
“The European Commission should understand that Europe didn’t have a 4 percent Euribor rate when the indicators were agreed in 2021 and that the economic situation has changed dramatically,” the minister told the Ziniu Radijas radio station.
“That mechanism could be more flexible,” she said. “I think that everybody will learn from the whole process, because it is not only Lithuania that has made all sorts of commitments.”
“There are other countries committed to ambitious goals, perhaps not in the tax system (…), but in other areas, and they are struggling,” the minister said.
“The European Commission has to look not only at what is on paper, but also at the real situation in the economy,” she added.
Armonaite opposes draft amendments to the Law on Real Estate that call for taxing all property owned by private individuals and she also criticized the government’s now postponed proposal, which is part of the tax reform package, on taxation of self-employed people.
Both of these taxes are related to Lithuania’s commitments to the Commission in order to receive RRF funds.
The EU’s executive arm has rejected as unjustified Lithuania’s request to postpone the adoption of the tax reform legislation until the first quarter of 2025.
The tax reform envisaged in Lithuania’s RRF plan aims to eliminate certain tax exemptions and special tax regimes, make the tax system more conducive to economic growth, and reduce income inequality and poverty.
The government tabled its proposed amendments to tax-related laws to the parliament in June, but after disputes, the ruling coalition decided not to push for their adoption.
The adoption of the bill on broadening the tax base also ran aground last week.
If the Commission granted the government’s request on tax targets, this would mean that the reform would have to be approved by the next parliament.
Lithuania still has a month to respond to the Commission’s reluctance to postpone the implementation of the tax targets.
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