Tax hikes needed to further boost defense funding – Lithuanian finmin

  • 2024-02-05
  • BNS/TBT Staff

VILNIUS – Taxes will have to be raised in Lithuania to increase defense funding even more but this will require a broad agreement among political parties, Finance Minister Gintare Skaiste says.

"If we consider our needs, and they are really significant, so we won’t be able to get the result we need with some changes. If we want a major result, we won't get a sustainable result without moving the big three whales of taxation," Skaiste told the public broadcaster LRT on Friday.

She was referring to the possibility of raising personal income, value added or corporate taxes. These options, along with several other options to raise defense funding, were presented at Prime Minister Ingrida Simonyte's meeting with politicians, business and worker's representatives last week.

Many politicians and experts agree that Lithuania needs more funding to host a German brigade, to establish an army division by 2030 and to increase the number of conscripts. The prime minister says the country needs an additional 0.7 percent of GDP annually until 2030, and after that, the amount of additional budget allocations should be around 0.4 percent of GDP.

Skaiste says it would mean around 550 million and 350-400 million euros respectively.

"First of all, we need to agree whether we are really committed to do something about it. It seems to me that security is important for the people of Lithuania, but we need to understand that there is no such thing as a free lunch, and that someone has to pay for that extra security," the finance minister said.

In her words, the government will look for the option that enjoys the widest support. Sustainable solutions are needed, she said, because the aim is to increase defense funding for decades.

"Therefore, we need a very broad consensus among political parties (...) In this case, the most important thing is to agree that there is a need to invest in defense, and we will agree on the measures one way or another," Skaiste said.

Politicians have also suggested increasing defense funding by making adjustments to the existing budget revenues, borrowing from financial institutions or citizens, and allowing people to voluntarily donate to the army.

The government vows to start working on more concrete proposals to increase defense next month.

Currently, defense funding in Lithuania stands at 2.71 percent of GDP, but next year the existing bank solidarity levy will expire, while the regular budgetary funding for defense is 2.52 percent of GDP.