Taxes will have to be raised in Lithuania in order to increase defence funding, but this will require a broad agreement among political parties, Finance Minister Gintarė Skaistė says.
“If we consider our needs, and they are really significant, we won’t be able to get the result we need with limited changes. If we want a major result, we won’t get a sustainable result without moving the big three whales of taxation,” Skaistė told LRT TV on Friday.
She was referring to the possibility of raising personal income taxes, the value added tax (VAT) on consumption, and corporate taxes on profits. These options, along with several other revenue sources, were presented at Prime Minister Ingrida Šimonytė’s meeting with politicians, business and workers’ representatives last week.
Many politicians and experts agree that Lithuania needs more funding to host a German brigade, to establish a military 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.
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Skaistė 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 doing 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 of the society. Sustainable solutions are needed, she said, because the aim is to increase defence 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 defence, and we will agree on the measures one way or another,” Skaistė said.
Politicians have also suggested increasing defence funding by making adjustments to the existing budget revenues, borrowing, and allowing people to voluntarily donate to the military.
The government vows to start working on more concrete proposals to increase defence spending next month.
Currently, Lithuania’s defence spending amounts to 2.71 percent of GDP. Some of it comes from a temporary tax on bank’s windfall profits – the so-called “solidarity contribution” – which is expiring next year. Without it, the regular budgetary funding for defence is 2.52 percent of GDP.
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