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Lithuania to increase tax-exempt income amount, postpone VAT exemptions on food

Xinhua, June 1, 2016 Adjust font size:

Lithuania's ruling coalition decided on Tuesday to increase tax-exempt income amount and postponed the decision on cutting Value Added Tax (VAT) rates on some of foodstuffs.

The political council of the ruling coalition discussed various options of cutting VAT rates, but ultimately decided to postpone the issue until September. Instead, the political body decided to increase the tax-exempt income amount.

The leader of the Order and Justice party, Rolandas Paksas, said the council had made a compromise decision in order to tackle social exclusion first.

"Therefore, it has been decided to increase tax-exempt income amount from 200 euros to 310 euros as of the new year," Paksas told journalists after the meeting, adding, "The new amount is to take effect as of the start of 2017."

The decision means that tax-exempt income amount would move closer to minimum wage, which currently amounts to 350 euros.

According to Prime Minister Algirdas Butkevicius, political allies disagreed on foodstuffs that should be subject to VAT exemptions and decided to continue discussions until the approval of the next year's state budget. The Social Democratic Party, the main ruling coalition party, wanted to cut rates on meat, the Labor party proposed VAT exemptions on a basket of basic foodstuffs, while the Order and Justice party offered to cut the standard VAT rate from 21 percent to 18 percent, business news website vz.lt reported

Recently, Lithuanian President Dalia Grybauskaite criticized the initiatives to cut VAT rates on some foodstuffs noting VAT exemptions would be the closest way of "granting retail chains with additional profits." She highlighted that some members of Lithuanian society were unable to buy food, and that the problem should be tackled by taking care of those with the lowest incomes and increasing tax-exempt income amount. Endit