Lithuania Considers Tax Cut on Meat to Boost Demand

LITHUANIA - In a bid to lower the prices of meat and stimulate domestic demand, the Lithuanian government is considering reducing the value-added tax (VAT) on fresh and chilled meat.

15 August 2016

2 minute read

Europe

The proposal was made by the country’s Minister of Finance Rimantas Sadzius. Should the reduction be passed, the Lithuanian state revenues would decrease by an estimated €43 million, according to data obtained by local news site Delfi.lt.

The Finance Ministry has been considering to implement a rate of 5 per cent or 9 per cent for fresh and chilled meat. Currently, the ministry applies a VAT rate of 21 per cent.

The Lithuanian prime minister Algirdas Butkevicius said that the lower VAT is expected to lead to a considerable decrease in meat prices, and, as a result, to raise domestic consumption. However, if local meat industry players do not lower their prices following the tax cut, the measure will be cancelled.

Butkevicius and Sadzius both represent the country’s Social Democratic Party (LSDP) in the Lithuanian government. However, Valentinas Mazuronis the leader of the party’s coalition partner, the Labour Party (DP), and a Member of the European Parliament, has spoken unfavourably of the proposed tax reduction, indicating that the cabinet still needed to reach an agreement on the planned move.

“I don’t understand why the reduced VAT rate should be only applied to meat,” Mr Mazuronis said, as reported by local news site 15 min.lt. “If we want food prices to be lower, it will not be enough to only reduce the VAT on meat.”

Should the measure be implemented, it is expected to come into force on 1 October, 2016, ahead of Lithuania’s forthcoming parliamentary elections which are scheduled to take place on 9 October, 2016.