Lithuania’s government rejects proposal to raise non-taxable income

The government rejected on Wednesday a proposal to raise the size of non-taxable income from EUR200 to EUR300, ELTA reported. The proposal was submitted by several lawmakers from the largest opposition party Homeland Union-Lithuanian Christian Democrats (TS-LKD) which earlier this summer supported the senior ruling LVZS’s forestry reform. The finance ministry argued that lower income earners will not actually benefit from a non-taxable income increase as a person with 2 children, for example, should earn at least EUR600 to take advantage of the full size of the benefit. Data from 2015 shows there are some 80,000 residents in Lithuania who cannot fully take advantage of the non-taxable income due to their low income. What is more, the government is currently planning to introduce changes to the tax system in the country which will also result in direct payments given out to parents with children which will effectively help low-income earners.

We remind that the government presented more details on the planned tax changes in early August. The measures will aim to reduce poverty and benefit low income earners with the social welfare package estimated to cost EUR600m. The fact that the proposal for change to the non-taxable income was submitted by the TS-LKD could play a role in future negotiations over the structure of the ruling coalition given that the conservative party has been mulled as one of the potential new partners of the Greens and Farmers if the Social Democrats decide to withdraw from the ruling coalition.

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