As the Finance Ministry proposes raising income taxes for some private individuals, President Gitanas Nausėda has expressed support for a moderately progressive tax system with a lower top rate than that proposed by the ruling bloc.
“A rate of up to 36 percent has been proposed, but I believe that’s too high for top earners. Capping it at 32 percent would be more reasonable, especially considering tax competition in the region,” Nausėda told LRT television on Thursday.
“If we’re serious about attracting qualified professionals and creating attractive jobs, the level of progressiveness should be moderate and remain within reasonable limits,” the president added.
“I’ve always supported this approach because Lithuania needs a growing economy,” he said.
The Finance Ministry is proposing four personal income tax rates ranging from 20 to 36 percent, aiming to make the system more progressive. The rates would be based on total annual income from all sources, excluding distributed profits.
The top rate of 36 percent would apply to the highest earners – those earning more than 120 times the average wage.
Finance Minister Rimantas Sadzius told BNS in an interview on Wednesday that most workers – particularly those in the middle class – would not be affected by the rate hike.
The ministry is also proposing a 10 percent tax on all non-life insurance contracts, excluding mandatory motor third party liability insurance.
The tax package includes raising the corporate income tax rate by one percentage point to 17 percent and increasing the reduced rate to 7 percent.
President Nausėda said he does not believe the proposed tax changes would trigger a recession, but he criticized the ruling bloc for failing to engage in broader dialogue with key stakeholders.
“What I still find lacking is an open and honest conversation with the business community, with its various organizations, and with trade unions. In a sense, the announcement came a bit too early. The government could have held more in-depth discussions with different interest groups before making the package public and moving toward a decision,” Nausėda said.
“Now, it was done in a way that many businesspeople would probably say was jumping the gun,” he added.
If all the proposals are adopted, the government expects to collect an additional 248.7 million euros for the state and municipal budgets next year, rising to 624.6 million euros by 2027.
Source: BNS
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