Lithuania to Raise Taxes to Cover Higher Defense Expenditures

(Bloomberg) -- Lithuania plans to raise taxes on companies and alcohol as part of package of measures the government is presenting to cover higher defense spending next year.

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The cabinet is seeking to generate an additional €400 million ($435 million) to meet its targeted 3% of gross domestic product in military expenditures in 2025, Finance Minister Gintare Skaiste told reporters on Tuesday. The additional funds are aimed at financing a German brigade deployment as well as boosting Lithuania’s defense capabilities.

The proposed fiscal steps include hiking the corporate tax rate to 16% from 15% and raising the excise tax on alcohol, tobacco and fuel. A new insurance tax will also be introduced to cover security outlays while a windfall levy on banks, which would have expired January, will also be kept in place for an additional year.

Lithuanian lawmakers will debate the proposals in the coming months. There’s broad support for the measures across the political spectrum and among the biggest companies in the Baltic nation, where the potential regional threat from Russia following Moscow’s invasion of Ukraine has dominated presidential elections this month.

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