2019 BUDGET at a GLANCE 2 National Budget – As a Family Budget

2019 BUDGET AT A GLANCE 2 National budget – as a family budgeT

We, usually, know our income, our obliga- tions, who in the family is responsible for buying food, who is responsible for fitting car tyres. One in the family is responsible for holi- day planning, the other – for negotiations with Santa Claus over the gifts. Each family dreams of good times and holidays, but at the same time we try to save up money for a “rainy day” or, alternatively, for the future – for the child’s education. The same is with the State budget – we plan revenue and estimate expenditure. We obser- ve the areas that are most in swift needed. As in the family, we do not want to borrow, but make our efforts to save up – „to put aside“ also for more difficult times. As in the family, we consider whether instead of the dinner for two at the restaurant – to make dinner to- gether with the whole family and to take it at home. Before spending money, we should know which circles your children will choose to attend this year and how much their new Minister of Finance rucksacks will cost. The government makes Vilius Šapoka estimations on how much it can contribute to the budget of each family, including the child’s money, remuneration for teachers. In tural reforms aimed to reduce labour taxati- the family we talk about grandparents’ health, on, to promote innovation and investments, maybe this year we will have to help them in to increase personal income and to enhance buying medicines, while the government allo- economic security, also to reduce the sha- cates a part of the budget to increase pensi- dow economy and to improve the quality and ons. In the family we confer – to take a loan for effectiveness of health and education sectors. a new car or, maybe, the old one is still good. Different times – different needs. In my opi- Or, maybe, to sell the car and to buy a bike? nion, a modern family cares for health, edu- The government figures out the reserve to be cation and training opportunities in a desi- accumulated, reviews expenses, searches for rable area, plans the future in the homeland. what is ineffective and where it is possible to Also, it cares for close relations with grandpa- save up. The budget is ours, we are looking rents, a sense of community and support to for a consensus and co-decision. We are con- those in current need. cerned about how to collect taxes, plan other inflows and how to properly allocate them. We planned this State budget as a family bud- The current-year budget focuses on struc- get.

BUDGET AT A GLANCE 3 Budget structure

One of the most important public welfare conditions – responsible management of public finances. A reflection of this management – the budget with effectively allocated resources to satisfy essential needs of the population and to ensure uninterrupted operation of the public service.

The State budget is one of the most vital government documents laying down the revenue and expenditure plan of the government for a year concerned. The State budget revenue consists of taxes paid by tax payers, income from assets, EU and other international financial assistance as well as other budget revenue reallocated through the State budget and designated for financing the State budget programmes.

60 municipalities located in Lithuania have their own independent budgets to be approved by municipal councils. Municipal budget revenue consists of a share of the personal income tax, revenue from local taxes, grants allocated from the State budget and other revenue designated for implementation of functions delegated by the government and supply of public services in municipalities.

Budget revenue of the State Social Insurance Fund (SODRA) comprises social insurance contributions payable by the insurers, insured and self-employed persons and contributions from the State budget to pay pensions, sickness, unemployment insurance benefits and to cover other related costs.

Budget revenue of the Compulsory Health Insurance Fund (CHIF) consists of the paid CHIF contributions, State budget contributions and other revenue for supply of personal health care services, acquisition and compensation for medicines and medical aids and reimbursement of other costs financed from the CHIF.

GENERAL GOVERNMENT

State Municipal State Social Compulsory Other general budget budgets Insurance Health Insurance government Fund Fund entities (SODRA) (CHIF) 45 % 18 % 25 % 11 % 1 %

Aggregate budgets of the State, municipal, State Social Insurance Fund, Compulsory Health Insur- ance Fund and other subfunds (e.g. Deposit and Investment Insurance Fund, Long-Term Employee Benefit Fund) form the general government revenue and expenditure. The difference between the two amounts is called the general government balance indicator. It is important to know that in good times of economic prosperity, the general government balance indicator should be positive – aiming at surplus and reserve accumulation. The reserves would be used during the downturn (if such occurs in the future) to pay pensions and other social benefits, to supply public services, to maintain the level of investment.

BUDGET AT A GLANCE 4 State budget preparation cycle

DECEMBER JANUARY - MARCH

The Parliament (Seimas) Institutions prepare budget adopts the budget law execution and performance reports

NOVEMBER MARCH - APRIL

The Parliament (Seimas) The Ministry of Finance discusses the draft budget prepares the Economic Development Scenario and general government financial projections

OCTOBER MAY - JUNE

The Government considers On-going negotiations the draft budget and after between the Prime Minister, consultations submits it to Minister of Finance and a the Parliament (Seimas) line minister concerning the planned next-year budget expenditure and consultations on the expected results

SEPTEMBER - OCTOBER JULY

The Ministry of Finance The Ministry of Finance informs develops and submits the draft the institutions about the budget to the Government and planned maximum spending the European Commission limits to be allocated for 3 upcoming years

SEPTEMBER JULY - AUGUST

The Ministry of Finance Institutions draw up 3-year updates the Economic strategic action plans and Development Scenario elaborate expenditure plans and general government financial projections

BUDGET AT A GLANCE 5 Macroeconomic projections

After 2017 exceptionally successful year for the Lithuanian economy, when GDP grew 3.9 %, it is projected that in 2018 the economy will further grow at an accelerated pace of 3.4 %. A slower growth rate is projected in 2019–2021 – by 2.6 % per year on average. Domestic demand in medium term will be a key economic driver. It will be promoted by the Government decisions related to the increase in personal income and strengthening the incentives to invest, as well as the implementation of projects financed from direct foreign investments and the European Union financial assistance and the need for investment to business process automation, technological renewal, innovation and other measures enhancing operational efficiency and productivity dictated by the tight labour market.

GDP change, %

4 3,9 3,5 3,4 3,5 3 2,8 2,5 2,5 2,5 2,3 2,0 2

1,5 1 0,5 0 2014 2015 2016 2017 2018P 2019P2020P 2021 P

BUDGET AT A GLANCE

8,7 10 5,8 3,5 4,7 5 2,4 2,4 1,3 1,1 1,5 0,7 0,8 0,7 0,2 0 -0,6 -5 -2,2 -4,6 -10 -9,3 -10,7 -15 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P 2019P 2020P 2021P

41 39,9 39,9 40 39

38 37,8 37 36,2 36 34,8 35 34,8 35 34,3 34 33 32 31 2014 2015 2016 2017 2018P 2019P 2020P 2021P

3,0 1,8 1,9 1,9 2,0 1,6 1,7 1,3 1,1 1,1 0,8 0,9 1,0 0,5 0,7 0,5 0,3 0,4 0,3 0,4 0,0 2014 2015 2016 2017 2018 2019 20202021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -1,0 -0,9 -0,9 -1,1 -1,4 -1,2 -1,3 -1,2 -1,2 -1,2 -1,2 -1,3 -1,3 -1,3 -1,3 -1,3 -1,3 -1,4 -1,4 -1,4 -2,0 -1,8 -1,9 -2,0 -1,9 -2,1 -2,0 -2,2 -2,3 -2,4 -2,4 -2,4 -2,4 -2,3 -2,2 -3,0 -2,5

15_64 65+ Iš viso gyventojų

1 0,6 0,5 0,4 0,5 0,3 0,2 0,1 2012 2013 2014 2015 0 2016 2017 2018 2019 2020 2021 -0,5 -0,3 -0,6 -1 -1,5 -2 -2,5 -2,6 -3 -3,5 -3,1 4 3,9 3,5 3,4 3,5 3 2,8 2,3 2,5 2,5 6 2,5 2,0 2 It is projected that the output gap will remain positive and will keep decreasing for the entire me- dium1,5 term. The output gap is a difference between the real and potential economic output levels. The 1potential economic output level (also called potential GDP) is a theoretical level under which the0,5 production factors – labour and capital – are used in the most effective manner. A positive 3,9 output04 gap demonstrates that more goods and services are produced than the potential of pro- 20143,5 2015 2016 2017 2018P3,4 2019P2020P 2021 P duction3,5 factors allows, i.e. production factors are overexploited. A negative output gap demons- trates3 that less goods and services are produced than the potential 2,8of production factors allows, i.e. production factors are not adequately exploited. 2,5 2,5 2,5 2,3 2,0 2 Output gap 1,5 1 8,7 10 0,5 5,8 0 3,5 4,7 5 2014 2015 2016 2017 2018P 2019P2020P 2021 P 2,4 2,4 1,3 1,1 1,5 0,7 0,8 0,7 0,2 0 -0,6 -5 -2,2 -4,6 -10 8,7 % of potential GDP 10 -9,3 5,8 -10,7 3,5 4,7 -155 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 22,4017 22,4018P 2019P 2020P 2021P 1,3 1,1 1,5 0,7 0,8 0,7 0,2 P – the0 projection of the Economic Development Scenario drawn up by the Ministry of Finance in September 2018 -0,6 The -5general government debt, before considering-2,2 the accumulation of financial resources for re- financing41 risk management in redemption -4,6of Eurobond issues, represented 36.2 % of GDP at the 39,9 39,9 end-140 of0 2017. It is projected that in medium term the general government debt level will maintain -9,3 a downward39 trend and at the end10,7 of 2021 will reach about 34.3 % of GDP. The debt-to-GDP ratio 37,8 - dynamics-1385 are in line with the general macroeconomic trends, long-term commitments to interna- tional37 institutions2004 2005 and2006 proposals2007 2008 by200 the9 2 01Organisation0 2036,211 2012 for201 3Economic2014 2015 Cooperation2016 2017 2 and018P Development.2019P 2020P 2021P 36 34,8 35 34,8 General35 government debt before considering the accumulation of financial resources for 34,refinan3 - cing34 risk management in redemption of Eurobond issues, % of GDP 33 3241 39,9 39,9 3140 39 2014 2015 2016 2017 2018P 2019P 2020P 2021P

38 37,8 37 36,2 36 34,8 35 34,8 35 3,0 34,3 34 1,8 1,9 1,9 2,033 1,6 1,7

1,3 1,1 32 1,1 0,9 0,7 0,8 1,031 0,5 0,5 0,4 0,4 2014 0,3 2015 0,3 2016 2017 2018P 2019P 2020P 2021P 0,0 2014 2015 2016 2017 2018 2019 20202021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -1,0 -0,9 BUDGET AT A GLANCE -0,9 -1,1 -1,4 -1,2 -1,3 -1,2 -1,2 -1,2 -1,2 -1,3 -1,3 -1,3 -1,3 -1,3 -1,3 -1,4 -1,4 -1,4 -2,0 3,0 -1,8 -1,9 -2,0 -1,9 -2,1 -2,0 -2,2 -2,3 -2,4 -2,4 -2,4 -2,4 -2,3 -2,2 -3,0 1,8 1,9 -2,51,9 2,0 1,6 1,7 1,3 1,1 1,1 0,8 0,9 1,0 0,5 15_640,7 65+ Iš viso gyventojų 0,5 0,3 0,4 0,3 0,4 0,0 2014 2015 2016 2017 2018 2019 20202021 2022 2023 2024 2025 2026 2027 2028 2029 2030 -1,0 1 -0,9 -1,1 -0,9 0,5 0,6 -1,4 -1,2 -1,3 -1,2 -1,2 -1,2 -1,20,3 -1,3 -1,3 -1,3 -1,3 -1,30,4 -1,3 -1,4 -1,4 -1,4 -2,00,5 0,2 -1,8 -2,0 -1,9 -1,9 0,1 2012 2013 2014 2015-2,1 -2,2 -2,2 -2,0 0 -2,3 -2,4 -2,4 -2,4 -2,5 -2,4 -2,3 -3,0 2016 2017 2018 2019 2020 2021 -0,5 -0,3 -0,6 15_64 65+ Iš viso gyventojų -1 -1,5 -2 1 0,6 -2,5 0,5 0,4 0,5 0,3 -2,6 0,2 0,1 -3 2012 2013 2014 2015 0 -3,5 -3,1 2016 2017 2018 2019 2020 2021 -0,5 -0,3 -0,6 -1 -1,5 -2 -2,5 -2,6 -3 -3,5 -3,1 4 3,9 3,5 3,4 3,5 3 2,8 2,5 2,5 2,5 2,3 2,0 2

1,5 1 0,5 0 2014 2015 2016 2017 2018P 2019P2020P 2021 P

8,7 10 5,8 3,5 4,7 5 2,4 2,4 1,3 1,1 1,5 0,7 0,8 0,7 0,2 0 -0,6 -5 -2,2 -4,6 -10 -9,3 -10,7 -15 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018P 2019P 2020P 2021P

41 39,9 39,9 40 39

38 37,8 37 36,2 36 34,8 35 34,8 35 34,3 34 33 32 31 2014 2015 2016 2017 2018P 2019P 2020P 2021P 7 General government

3,0 1,8 1,9 1,9 2,0 1,6 1,7 balance indicator 1,3 1,1 1,1 0,8 0,9 1,0 0,5 0,7 0,5 0,3 0,4 0,3 0,4 In 2016, for the first time after the restoration of independence, a positive general government 0,0 nominal2014 balance2015 indicator2016 2017 of2018 the2019 country20202 – 021general2022 government2023 2024 2025 surplus2026 –2027 was 2028recorded.2029 203It 0is planned that in the upcoming 3-year period it will further remain positive and will constitute -1,0 -0,9 0.4 % of GDP in-0,9 2019, 0.2 % of GDP in 2020 and 0.1 % of GDP 2021, accordingly. The preparations -1,1 -1,4 -1,2 -1,3 -1,2 -1,2 -1,2 -1,2 -1,3 -1,3 -1,3 -1,3 -1,3 -1,3 -1,4 -1,4 -1,4 are-2,0 underway to exploit the opportunities of the continuing accelerated economic growth and to -1,8 -2,0 -1,9 -1,9 prepare for a possible downturn by gradual-2,1 -2,2accumulation of financial reserves, and to-2,2 implement -2,0 -2,3 -2,4 -2,4 -2,4 -2,5 -2,4 -2,3 the-3,0 structural reforms.

15_64 65+ Iš viso gyventojų General government nominal balance in 2012-2021, % of GDP

1 0,6 0,5 0,4 0,5 0,3 0,2 0,1 2012 2013 2014 2015 0 2016 2017 2018 2019 2020 2021 -0,5 -0,3 -0,6 -1 -1,5 -2 -2,5 -2,6 -3 -3,5 -3,1

BUDGET AT A GLANCE 8 Budget revenue and expenditure

Total budget revenue and expenditure, including transfers between the state budget and the State Social Insurance Fund, the Compulsory Health Insurance Fund and municipal budgets.

REVENUE 2016 2017 2018 2019 2020 2021 EUR million ACTUAL REVENUE PLANNED REVENUE

State budget revenue 7,480.3 7,796.3 9,071.1 10,589.6 11,263.1 11,634.9

O/w: EU and other international 1,432.8 1,423.4 2,303.9 1,921.6 2,067.4 1,836.7 financial assistance REVENUE State Social Insurance Fund 3,438.8 3,792.6 4,252.8 4,455.5 4,698.2 4,933.4 revenue

Compulsory Health Insurance 1,484.2 1,640.3 1,763.8 2,059.8 2,209.7 2,355.0 Fund revenue

Municipal revenue 2,638.4 2,772.9 2,782.8 2,944.5 3,031.0 3,106.3

EXPENDITURE 2016 2017 2018 2019 2020 2021 Eur milliom ACTUAL EXPENDITURE PLANNED EXPENDITURE

State budget expenditure 7,925.8 8,119.8 9,560.3 11,705.9* 12,031.8 12,535.3

O/w: EU and other international 1,451.1 1,297.7 2,101.2 2,242.7 2,295.9 2,050.6 financial assistance

State Social Insurance Fund 3,436.8 3,685.9 4,012.3 4,043.4 4,290.7 4,536.6 expenditure

Compulsory Health Insurance 1,474.2 1,563.0 1,691.4 1,954.8 2,194.9 2,349.6 Fund expenditure

EXPENDITURE Municipal expenditure 2,540.0 2,713.4 2,782.9 2,924.8 3,021.9 3,102.9

*A transfer of a share of social security contributions to the State budget included (EUR 1,588.7 million)

BUDGET AT A GLANCE 9 Budget revenue structure

The structure of the State, municipal, State Social Insurance Fund and Compulsory Health Insur- ance Fund budget main revenue by revenue source and detailed type of revenue (EU and other international financial assistance excluded) in 2019:

General government revenue structure, EUR million

1,509.8

739.0 3,841.5

1,742.7 REVENUE

2,772.5 1,538.3

1,442.2

VAT 3,841.5 Income from goods and services 215.5

Social insurance contributions 2,772.5 Transactions for tangible and intangible assets and incurrence of 124.7 Health insurance contributions 1,442.2 financial commitments

PIT (for municipal budgets) 1,538.3 Corporate income tax 739.0

PIT (for the State budget) 1,742.7 Excise duties 1509,8 Dividends and corporate income payments by public undertakings 206.3

BUDGET AT A GLANCE 10 A share of the EU and other in- A share of the EU and other international financial ternational financial assistance assistance represents about 10 % of the general government budget revenue in 2019: EU and other international financial In 2019 the State budget revenue 10% assistance (EU and other international financial assistance included) will make up EUR 10,589.6 million. The major share of revenue will consist of income from taxes – EUR 8,012.8 million or about 75.7 % of total planned revenue. Other revenue in 2019 will constitu- State budget revenue structure te EUR 530.5 million (5 % of total State budget revenue), income EU and other inter- from transactions for tangible and national financial intangible assets and incurrence assistance 18% of financial commitments – EUR 124.7 million (1.2 %), EU and other Transactions for tan- international financial assistan- gible and intangible ce – EUR 1,921.6 million (approx. assets and incur- 18.1 %). rence of financial commitments Income from taxes: 1% The major share of tax revenue will consist of VAT revenue – EUR Taxes Other revenue 3,841.5 million or 47.9 % of total 76% 5% State budget revenue from taxes. Excise duties will make up EUR 1,509.8 million or 18.8 % of total income from taxes. The corpora- Structure of the State budget revenue from taxes te income tax will amount to EUR 739 million or approx. 9.2 % of in- Other taxes come from taxes, and PIT revenue PIT will constitute EUR 1,742.7 million 2% 22% or 21.7 % of the State budget revenue from taxes. Corporate income tax In 2019 PIT revenue, as compared to the 9% plan for 2018, will be higher by EUR 1,430.6 million. This is due to the transfer of a share of the social insurance rate to the personal income tax, also considering the reduction of the PIT rate by 1 percentage Excise duties point, increase in non-taxable income rate VAT and extension of its pending procedure. 48% 19%

BUDGET AT A GLANCE 11 State budget expenditure

Consolidated expenditure of the State budget, State Social Insurance Fund (SODRA) and Compul- sory Health Insurance Fund (CHIF) in 2019 are EUR 15,838.6 million.

EUR State million budget 0 1000 2000 3000 40005000 6000 expenditure

SOCIAL SECURITY 5,462.9 35,5%

HEALTH 2,130.2 13,8%

SAFETY 1,702.4 11,1%

EDUCATION 1,484.1 9,6%

GOVERNMENT 9,5% MANAGEMENT 1,461.8 PROMOTING ECONOMIC 1,184.9 7,7% DEVEPOLMENT

AGRICULTURE 984.0 6,4%

ENVIROMENT 396.3 2,6%

CULTURE, SPORTS 352.2 2,3% AND MEDIA

JUSTICE 224.8 1,5%

BUDGET AT A GLANCE

EUR 5,462.9 FOR SOCIAL million SECURITY

STATE BUDGET*

EUR 1,419.5 SODRA EUR 5,462.9 million BUDGET million *The expenditure of the state budget does not include EUR 1722.1 million transfers to the Sodra budget for the main (basic) part of the pen- EUR 4,043.4 sion and other needs. million

SODRA BUDGET STATE BUDGET

676.9 377.3 196.6

3,111.7 649.6

EUR million EUR million Pensions 3,111.7 Assistance to child- 377.3 Sickness and maternity 676.9 raising Unempl. insurance 144.1 Pensions and benefits 649.6 Other purposes 110.7 Population custody 196.6 Employment promotion 137.0 Other purposes 59.0

BUDGET AT A GLANCE 13

EUR 2,130.2 FOR HEALTH million

STATE BUDGET*

EUR 175.4 CHIF million BUDGET EUR 2,130.2 million *The expenditure on the state budget does not include EUR 598.5 million EUR 1,954.8 transfers to the PSDF CHIF million budget.

CHIF BUDGET STATE BUDGET*

53.7 349.2

1,391.4 121.7

EUR million EUR million Treatment 1,391.4 Public health 53.7 Medicines 349.2 Other purposes 121.7 Rehab. and desease 59.0 prevention Other purposes 155.2

BUDGET AT A GLANCE 14

EUR 1,702.4 FOR million SAFETY

298.7

EUR million 980.8 National defence 980.8 Police 235.9 235.9 Fire protection 112.2 Border protection 74.8 Other purposes 298.7

EUR 1,484.1 FOR million EDUCATION

447.1

933.3 EUR million General education 933.3 Vocational training 103.7 Higher education and 447.1 research

BUDGET AT A GLANCE 15

EUR 1,461.8 FOR GOVERNMENT million MANAGEMENT

EUR million Debt management 451.9 338.9 451.9 Tax administration 120.6 Financing of the EU budget and international 476.8 organisations Diplomatic service 73.6 Public administrations 338.9 476.8

FOR PROMOTING EUR 1,184.9 ECONOMIC million DEVELOPMENT

113.7

199.0 EUR million 830.8 Transport 830.8 Energy 199.0 Promotion of investments 41.4 Other purposes 113.7

BUDGET AT A GLANCE 16 EUR 984.0 FOR million AGRICULTURE

EUR million Support for rural areas 899.4 Fishery 20.1 899.4 Food safety and animal 34.4 Land management 30.1

EUR 396.3 FOR million ENVIRONMENT

90.9

EUR million Renovation of multi- 305.4 90.9 apartment buildings Nature protection 305.4

BUDGET AT A GLANCE 17

FOR CULTURE, EUR 352.2 SPORTS AND million MEDIA

45.2 86.3 EUR million 42.1 Fostering art 86.3 To keep historical memory 108.3 (culture) 70.3 108.3 Other cultural purposes 70.3 Sports 42.1 Media 45.2

EUR 224.8 FOR million JUSTICE

71.5

153.3

EUR million Courts and public 153.3 prosecutor's offic Prisons 71.5

BUDGET AT A GLANCE 18 Structural reforms and other priority areas in 2019

It should be noted that the year 2019 is an exclusive year – when 6 structural reforms of funda- mental structural changes will be implemented in: • education and science; • health care; • social insurance; • innovation; • reduction of the shadow economy; • taxes.

More detailed information about the reforms is available at http://lrv.lt/uploads/main/documents/files/LRV%206%20strukturines%20reformos.pdf

In 2019 additional budget appropriations will be concentrated on the implementation of these reforms and other priority tasks of the Government – financing of strategic projects, financing of national defence, implementation of legal provisions and incurred commitments and other purposes.

BUDGET AT A GLANCE 19 Additional allocations in 2019, as compared to 2018:

Social security EUR 427 million Additional allocation in 2019

• To increase pensions (indexation); • To increase payments of the child’s money up to EUR 50 per month; • To increase basic salary and minimum monthly salary (MMS); • To improve the quality of social security services, to support social enter- Area prises; • Support to low-income and young families for housing; • Social workers – case manager services

Health care EUR 279 million Additional allocation in 2019

• To ensure higher salaries for medical staff, trainee doctors, public health specialists and their further increase; Area • Improving the quality of health care

Education EUR 185 million Additional allocation in 2019

• To increase salaries for teachers, lecturers and researchers; Area • Improving the quality of education, science and studies

BUDGET AT A GLANCE 20

Environmental EUR 102 million protection Additional allocation in 2019

• Investments related to the development and renewal of environmental protection infrastructure; Area • Implementation of the measures under the climate change programme

National defence EUR 74.9 million Additional allocation in 2019

• To reinforcement of national defence and capabilities to sustain the rate of Area 2 % from GDP for national defence

Culture EUR 42 million Additional allocation in 2019

Area • To increase salaries for cultural workers, to finance cultural projects

Innovation EUR 23.4 million Additional allocation in 2019

Area • To finance the structural reform in innovation

BUDGET AT A GLANCE 21 Tax and shadow reform

Since the year 2019 the 3-year plan of major taxation changes covering non-taxable income (NTI), personal income tax (PIT) and excise duties will come into force. In 2019–2021 labour taxes will keep decreasing, especially for medium-income individuals. The application of NTI will be suc- cessively increased and expanded up to 2 average salaries (AS). It is projected that in 2021 labour taxation in Lithuania will be the most competitive among the Baltic states, thus promoting investments to job creation in Lithuania.

To reduce the shadow various methods will be employed from the year 2019.

Reducing the shadow

WHAT IS PRESENTLY WHAT HAS BEEN ADOPTED? IT MEANS THAT THE SITUATION?

One-time opportunity for paying The possibility will be offered to “forgotten” taxes without any fines start functioning in a transparent N/A and interest for late payments manner, a fair competitive (6 –month period) environment will be ensured

“White finances“ – set minimum A fair competitive environment reliable taxpayer criteria based will be ensured: fair business on which the decisions on the will be offered a better access N/A possibility of participating in public to public procurement, lower procurement, receive support, administrative burden, also the apply a shorter tax limitation period process in receiving assistance will be made will be more transparent

The possibility of recovering a part Created incentives for purchasing of GDP paid for purchased finishing N/A officially recorded finishing and and repair services, car repair and repair services, child care services child care services

BUDGET AT A GLANCE 22 Tax reform

WHAT IS PRESENTLY THE WHAT HAS BEEN ADOPTED? IT MEANS THAT SITUATION?

To expand the application of NTI In 2019–2021 labour taxes up to 2 AS and to increase it on will keep decreasing, annual basis: especially for medium- income individuals. • In 2019 – EUR 300 • In 2020 – EUR 400 • In 2021 – EUR 500 NTI

EUR 380 Gross salary Increase in net salary, EUR/month (current) (after the reform) (acc. to the new system, the equivalent– 2019 2020 2021 Total: EUR 272) 500 18 21 22 61 900 40 16 18 74 1200 54 12 16 82 1500 48 8 14 70 2000 40 1 10 51

After a merge of the employee’s An employee will see total and employer’s social contribu- cost of his workstation and tions, the labour income is subject the amount of taxes paid to PIT rate – 20 % and 27 % for from the cost of the work- income exceeding SODRA ceiling station

(in 2019 – 120 AS per year; in 2020 – 84 AS per year; PIT 15 % in 2021 – 60 AS per year)

Individual activities and dividends – 15 %

Other income exceeding 120 AS, – 20 %

BUDGET AT A GLANCE 23

WHAT HAS BEEN ADOPTED? IT MEANS THAT

Consistently to increase excise It contributes to the health Excise duty rates on tobacco products objectives. (in 2019 – 2021) and to tax the duties electronic cigarette liquid:

TOBACCO PRODUCTS AND SUBSTITUTES 1/03/2018 1/03/2019 1/03/2020 1/03/2021

Minimum excise duty rate, 102 108,5 115,5 96 EUR/1,000 units (+6,3 %) (6,4 %) (+6,5 %)

Specific excise duty 62.25 65.7 69.4 Cigarrettes 59 component, EUR/1,000 units (+5.5 %) (5.5 %) (5.6 %)

Ad valorem excise duty 25 % 25 % 25 % 25 % component, %

42 48 55 Cigars and cigarillos, EUR/kg 37 (+13.5 %) (+14.3 %) (+14.6 %)

Smoking tobacco and fusing tobacco 60.24 68.6 78,5 90 products, EUR/kg (1/01/2018) (+13.9 %) (+14.4 %) (+14.6 %)

Electronic cigarette liquid, EUR/ml 0.12 0.12 0.12

BUDGET AT A GLANCE