Opposition will not support the PVM (VAT) increase and defence tax ahead of a meeting on defence funding

The parties participating in the meeting initiated by Prime Minister Ingrida Šimonytė on Monday have prepared their proposals on how to increase funding for defence sustainably. Among the proposals are an initiative to increase the corporate income tax, to extend the period of application of the bank solidarity levy, and to seek opportunities to borrow money for national defence on preferential terms. However, the opposition parties claim that they will not support proposals to introduce a defence tax or increase the value-added tax PVM (VAT) rate, which is emerging in the ranks of the ruling parties.

Seimas, Ingrida Šimonytė, Aušrinė Armonaitė, Viktorija Čmilytė-Nielsen, koalicija<br>Photo by R.Danisevičius.
Seimas, Ingrida Šimonytė, Aušrinė Armonaitė, Viktorija Čmilytė-Nielsen, koalicija<br>Photo by R.Danisevičius.
Vytautas Mitalas<br>Photo by R.Danisevičius.
Vytautas Mitalas<br>Photo by R.Danisevičius.
Rasa Budbergytė<br>Photo by R.Danisevičius.
Rasa Budbergytė<br>Photo by R.Danisevičius.
Seimas, Eugenijus Gentvilas<br>Photo by R.Danisevičius.
Seimas, Eugenijus Gentvilas<br>Photo by R.Danisevičius.
Ramūnas Karbauskis Aurelijus Veryga<br>Photo by T. Bauras.
Ramūnas Karbauskis Aurelijus Veryga<br>Photo by T. Bauras.
Saulius Skvernelis<br>Photo by V.Skaraitis.
Saulius Skvernelis<br>Photo by V.Skaraitis.
Seimo posėdis, Seimas, Ingrida Šimonytė, Gabrielius Landsbergis, Viktorija Čmilytė-Nielsen, valdančioji koalicija<br>Photo by R.Danisevičius.
Seimo posėdis, Seimas, Ingrida Šimonytė, Gabrielius Landsbergis, Viktorija Čmilytė-Nielsen, valdančioji koalicija<br>Photo by R.Danisevičius.
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Lrytas.lt

Jan 29, 2024, 5:10 PM

Coalition partners will also present their proposals

Eugenijus Gentvilas, the elder of the Liberal Movement group in the Seimas, believes that to increase the funds allocated to defence sustainably, several funding sources must be envisaged.

"Our group's current position is that more than one source must be envisaged because if one source is envisaged, it may not succeed. As an example, we refer to the Conservatives' talk about increasing the PVM rate - we know that last year, EUR 800 million of PVM was not collected. There is no guarantee that there will be money for defence if the PVM rate is increased," Mr. Gentvilas told Elta.

"That is why we propose a diversified model, including tax matters. We will decide whether it will be a PVM or a defence tax here in a discussion with other parties," he added.

However, in addition to tax changes, according to E. Gentvilas, it is also necessary to provide for more excellent borrowing opportunities from the domestic market.

"The second component is borrowing, with priority given to borrowing from the domestic market, i.e. from our people and businesses. People have EUR 21 billion in bank savings, and businesses have EUR 8 billion in free working capital. We have €29 billion, and this money should be borrowed from, not from some international financial institutions," he stressed.

The Liberals also propose encouraging people and businesses to donate to national defence and promote investment in defence, he said.

"So, the third part is charity, donations and things like that. Just as we encourage people to donate to Ukraine, we can encourage people to donate to national defence. Yes, I agree, it will not be a big source, but I think it could be quite a few million," said E. Gentvilas.

Vytautas Mitalas, the elder of the Freedom Group in the Seimas, who will attend the meeting initiated by the Prime Minister, said that the liberals have also prepared their proposals for additional funding for defence. However, the politician says he does not want to announce them before the meeting.

Opposition criticises the proposal to increase the PVM rate

The position of the Conservatives, who are attending the meeting with the Prime Minister, is critical of the Conservatives' proposals to increase funding for defence. Some of the Government's initiatives, such as increasing the PVM rate, would be painful for the country's population.

"Increasing PVM would not be supported by the Social Democrats because it would put a rather heavy burden on the shoulders of ordinary people who do not receive very high incomes because all

services and goods would become more expensive," Rasa Budbergytė, the elder of the Lithuanian Social Democratic Party (LSDP) group in the Seimas, told Elta.

Therefore, she said, the Social Democrats will propose to increase the corporate income tax from 15% to 20% during the meeting initiated by Ingrida Šimonytė. Ms Budbergytė points out that the LSDP is not backing down its initiative to create defence bonds.

According to the Social Democrats, it is also necessary to seek preferential conditions for Lithuania to borrow for defence.

"We believe that we need to take the initiative at the EU level to give preferential treatment to us, as the most vulnerable countries on the EU's borders, for defence borrowing," she stressed.

The Lithuanian Peasant Popular Union (LVŽS) will also propose at the meeting of the parties' representatives to actively use the possibilities for borrowing for defence.

"We propose to rely on the credit system to take out credits. Our public debt is not so high that we cannot afford it," LVŽS chairman Ramūnas Karbauskis told Elta.

The leader of the Peasants' Union stresses that his party will not support the introduction of a defence tax, nor will it support an increase in the PVM rate and the corporate tax. However, he said, extending the bank solidarity tax could be considered.

"As long as a bank levy exists, we can't even talk about charging people extra. Because the bank tax is a tax on the people - we all pay it by paying interest, by paying for the services of the banks," said the LVŽS chairman.

"On the other hand, the bank tax might not be the most painful solution for additional financing", he added.

For his part, Saulius Skvernelis, chairman of the Democratic Union Vardan Lietuvos (In the Name of Lithuania), said that he would like to hear the Government's proposals for defence financing at a meeting with the Prime Minister.

"We will listen to the Government, what it thinks, what it is thinking, from what sources and for what purposes it hopes to find funds. I hope this plan will already be available," Saulius Skvernelis told Elta, stressing that he hoped to see the complete picture of how the ruling party intends to strengthen the country's defence.

The politician pointed out that Vardan Lietuvos has also prepared its proposals on sources of funding for defence. Although the politician does not intend to announce these initiatives yet, he stresses that the proposals to introduce a defence tax or to increase PVM will certainly not be supported by the party he leads.

Conservatives set out a plan to strengthen defence by increasing funding for national defence

Meanwhile, the Presidium of the Homeland Union-Lithuanian Christian Democrats (TS-LKD) on Tuesday adopted a plan to strengthen Lithuania's defence, which proposes the introduction of universal conscription, an additional 0.5% of BVP (GDP) for defence from 2025, and the establishment of a fortification zone on the border with Russia and Belarus.

According to Conservative leader Gabrielius Landsbergis, the plan reflects the Conservatives' position on the priorities for strengthening the country's defence, which will be presented at a meeting on Monday.

The defence funding meeting initiated by the Prime Minister will occur on 29 January between parties, businesses and trade unions.

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