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Best Investments for Peace: Lithuania Raises Taxes to Increase Defence Spending to 3% of GDP

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Photo: Best Investments for Peace - Lithuania Raises Taxes to Increase Defence Spending to 3% of GDP. Source: Lietuvos-Respublikos-Seimas
Photo: Best Investments for Peace - Lithuania Raises Taxes to Increase Defence Spending to 3% of GDP. Source: Lietuvos-Respublikos-Seimas

The Lithuanian Seimas passed a package of so-called defence taxes yesterday, initiated with the aim of increasing national defence funding to 3% of GDP. To this end, the parliament raised corporate tax and excise duties on alcohol, tobacco and fuel, and passed the so-called Defence Fund Law. The Seimas also determined that local authorities will contribute 25 million annually to civil defence projects from their share of personal income tax, according to Lithuanian media outlets Alfa and Kauno Diena.

The Defence Fund will be aimed at accumulating funds that will meet the extremely urgent needs of strengthening the state's defence capability and civilian security. 

The law was passed after 107 MPs voted in favour, two voted against and 18 abstained.

"This is the best investment for peace," said Finance Minister Gintare Scaiste.  

She stressed that "there is a strong signal" of political support for such defence funding.  

"This year, we will be able to make a decision on procurement and allocate money for advance payments," the minister added.

Representatives of the Union of Lithuanian Peasants and the Greens voted against the initiatives in the Seimas the most. "Dainius Gaižauskas of Valstietis argued that the amendments to the laws would increase taxes and that people with the lowest incomes would feel the impact the most.

"You have turned Lithuania against each other because you have targeted people with the lowest incomes with tax measures," he said.  

In contrast, conservative Vilius Semeska stressed that the adoption of such a law is a signal from Lithuania to NATO that it is sufficiently funding its national defence.

Defence funding is being increased in order to develop a Lithuanian army division faster, host a German brigade by 2027, and prepare for a general conscription.

The tax increase will increase national defence spending by several hundred million euros a year.

As G. Skyste told reporters after the Seimas voted, the decisions adopted by the Seimas in 2026 will fully meet the need for defence funding and raise about 300 million euros.

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