Toward A Sustainable and Inclusive Consolidation in Lithuania: Past Experience and What is Needed Going Forward
IMF Working Papers, July 3, 2013
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- Toward A Sustainable and Inclusive Consolidation in Lithuania: Past Experience and What is Needed Going Forward
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Bibliographic details
- Authors: Nan Geng
- Published: July 3, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475568851.001
Review of fiscal consolidation since 2009
- Reviews Lithuania’s fiscal consolidation since 2009.
- Assesses the contribution of revenue and expenditure to the consolidation.
- Evaluates the composition and quality of measures implemented over the consolidation period.
Main findings on composition and quality of measures
- Despite having the lowest revenue-to-GDP ratio in the EU, Lithuania’s fiscal adjustment has so far relied mainly on expenditure measures.
- The quality of measures deteriorated over time.
- There is ample scope to implement high quality revenue measures to complete the fiscal adjustment in the medium term in a sustainable and inclusive manner.
Tax system assessment
- Lithuania’s tax system, in comparison with other EU countries and regional peers, is skewed toward labor and consumption taxes.
- The tax system plays a more limited role in income redistribution, especially in the upper income brackets.
Policy implications and recommendations
- Implement high quality revenue measures to complement past expenditure-based consolidation.
- Design revenue measures that enhance sustainability and inclusiveness of fiscal adjustment.
- Consider reforms to tax structure to reduce skew toward labor and consumption taxes and strengthen the role of taxation in income redistribution, particularly for upper income brackets.
- Strengthen revenue administration and tax effort to improve revenue generation capacity.