## Taxes in Lithuania: Benchmarking and Policy Options

_Selected Issues Papers, October 13, 2025_

## Source details

**Canonical URL:** [Taxes in Lithuania: Benchmarking and Policy Options](https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/10/taxes-in-lithuania-benchmarking-and-policy-options-571138)

## Other formats

- [Markdown version](/en/publications/selected-issues-papers/issues/2025/10/10/taxes-in-lithuania-benchmarking-and-policy-options-571138/index.md)
- [Structured JSON version](/en/publications/selected-issues-papers/issues/2025/10/10/taxes-in-lithuania-benchmarking-and-policy-options-571138/index.json)
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## Bibliographic details
- Authors: Lukas Boer, Tara Iyer, Martin Grote, Tibor Hanappi, Fayçal Sawadogo
- Published: October 13, 2025
- Series: Selected Issues Papers
- DOI: https://doi.org/10.5089/9798229026642.018

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### Summary
- Lithuania faces immediate fiscal challenges from increased defense needs adding to the existing long-term spending pressures.
- Tackling these requires a multifaceted strategy, including revenue mobilization to ensure fiscal sustainability.
- This note examines tax policy options, assessing potential changes and their effects.
- It benchmarks Lithuania’s tax system with Baltic and European peers and analyzes revenue mobilization scenarios.
- Findings suggest that improving VAT efficiency, and adjusting personal income and property taxes, could boost revenues while enhancing progressivity.

### Major findings
- Immediate fiscal pressures are driven by increased defense needs combined with long-term spending pressures.
- Benchmarking against Baltic and European peers highlights areas where Lithuania’s tax system diverges from regional comparators.
- Revenue mobilization potential exists through:
  - Improving VAT efficiency.
  - Adjusting personal income tax.
  - Adjusting property taxes.
- Reforms could both boost revenues and enhance progressivity.

### Policy options and recommendations
- Improve VAT efficiency to capture revenue currently lost to exemptions, reduced compliance, or administrative gaps.
- Adjust personal income tax parameters to increase revenues while considering distributional impacts.
- Reform property taxation to broaden the base and increase revenues in a way that can be progressive.
- Adopt a multifaceted strategy combining tax policy changes and revenue administration measures to ensure fiscal sustainability given rising defense spending and long-term pressures.

### Analytical approach and scope
- Benchmarks Lithuania’s tax system with Baltic and European peers.
- Analyzes revenue mobilization scenarios to assess the effects of potential tax policy changes.
- Focuses on corporate income tax, personal income tax, property tax, VAT efficiency, and revenue administration.

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## Content in this bundle

- **1. Benchmarking Tax Revenues**
  - [1. Benchmarking Tax Revenues (Markdown version)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025137.pdf.md){rel="alternate" type="text/markdown"}
  - [1. Benchmarking Tax Revenues (PDF)](/-/media/files/publications/selected-issues-papers/2025/english/sipea2025137.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/selected-issues-papers/issues/2025/10/10/taxes-in-lithuania-benchmarking-and-policy-options-571138_