Economic Sustainability
#11Key Findings
Lithuania falls into the upper-middle ranks (rank 11) in the category of economic sustainability.
Despite government commits to a circular economy transition, progress remains slow. Critical infrastructure policies focus on protection rather than upgrades. Driven by the need to reduce reliance on Russia, progress toward renewable-energy goals has accelerated.
Labor market reforms have made hiring and firing more flexible, contributing to economic adaptability during crises like COVID-19. Active labor market policies are not a focus. The employment service provides training, but most individuals find jobs independently. Business associations criticize restrictive immigration policies, given the high demand for labor.
Lithuania relies heavily on indirect taxes, especially VAT. A flat income tax rate has been discarded in favor of progressive income tax brackets. Environmental taxes are not ambitious. While budget deficits are moderate, and overall debt is low by cross-EU standards, fiscal sustainability concerns are rising. Fintech sector regulation is highly developed.
Despite government commits to a circular economy transition, progress remains slow. Critical infrastructure policies focus on protection rather than upgrades. Driven by the need to reduce reliance on Russia, progress toward renewable-energy goals has accelerated.
Labor market reforms have made hiring and firing more flexible, contributing to economic adaptability during crises like COVID-19. Active labor market policies are not a focus. The employment service provides training, but most individuals find jobs independently. Business associations criticize restrictive immigration policies, given the high demand for labor.
Lithuania relies heavily on indirect taxes, especially VAT. A flat income tax rate has been discarded in favor of progressive income tax brackets. Environmental taxes are not ambitious. While budget deficits are moderate, and overall debt is low by cross-EU standards, fiscal sustainability concerns are rising. Fintech sector regulation is highly developed.
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How committed is the government to driving the transition toward a circular economy?
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The government is clearly committed to transitioning to a circular economy.
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The government is largely committed to transitioning to a circular economy.
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The government is somewhat committed to transitioning to a circular economy.
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The government is not at all committed to transitioning to a circular economy.
The government is largely committed to transitioning to a circular economy. In its program, the coalition government formed in late 2020 committed to bringing recycling rates up to the EU average by 2024, and to shift completely to a circular economy by 2050. Concrete measures leading the way to a circular economy were included among the priorities in the government program. In 2023, the government adopted guidelines for transitioning to the circular economy by 2035.
In its annual report on activities for 2022, the government noted that in 2021, product utilization rates remained three times lower than the EU average and acknowledged that it would not achieve the recycling goal set for 2024 (The Government Annual Report for 2022, 2023). This is also suggested by the circular material use rate (circularity index), which was the seventh-lowest in the EU and less than half the EU average, and which has not shown any significant progress since 2015.
Citations:
The Seimas. 2020. The Resolution on The Program of the Eighteenth Government of Lithuania, December 11. No. XIV-72.
The Government Annual Report for 2022. 2023. “17 May.” https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
Lithuanian Ministry of the Environment. “The Guidelines of Lithuania’s Transition to Circular Economy by 2035 (in Lithuanian).” https://am.lrv.lt/lt/veiklos-sritys-1/tarsos-prevencija/strateginis-pasekmiu-aplinkai-vertinimas/aplinkos-ministerijos-inicijuoti-spav/lietuvos-perejimo-prie-ziedines-ekonomikos-iki-2035-m-gairiu-strateginis-pasekmiu-aplinkai-vertinimas/
Eurostat. “Circular material use rate.” https://doi.org/10.2908/SDG_12_41
In its annual report on activities for 2022, the government noted that in 2021, product utilization rates remained three times lower than the EU average and acknowledged that it would not achieve the recycling goal set for 2024 (The Government Annual Report for 2022, 2023). This is also suggested by the circular material use rate (circularity index), which was the seventh-lowest in the EU and less than half the EU average, and which has not shown any significant progress since 2015.
Citations:
The Seimas. 2020. The Resolution on The Program of the Eighteenth Government of Lithuania, December 11. No. XIV-72.
The Government Annual Report for 2022. 2023. “17 May.” https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
Lithuanian Ministry of the Environment. “The Guidelines of Lithuania’s Transition to Circular Economy by 2035 (in Lithuanian).” https://am.lrv.lt/lt/veiklos-sritys-1/tarsos-prevencija/strateginis-pasekmiu-aplinkai-vertinimas/aplinkos-ministerijos-inicijuoti-spav/lietuvos-perejimo-prie-ziedines-ekonomikos-iki-2035-m-gairiu-strateginis-pasekmiu-aplinkai-vertinimas/
Eurostat. “Circular material use rate.” https://doi.org/10.2908/SDG_12_41
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How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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The government is somewhat committed to updating basic technical infrastructure.
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The government is not at all committed to updating basic technical infrastructure.
The government is largely committed to updating the country’s technical infrastructure. However, the focus is on protection rather than upgrading, and the commitment varies depending on the sector. Sectors seen as potentially vulnerable to external threats, such as energy infrastructure, have received more political attention and resources, allowing for connections with partners in the EU and NATO. After the initiation of Russia’s large-scale war against Ukraine in 2022, the government adopted additional measures to protect physical critical infrastructure and data. Planning for the development of military and civilian infrastructure necessary to support the expansion of NATO forces, particularly the stationing of the German brigade beginning in 2027, gathered pace in 2023.
There is extensive regulation aimed at protecting objects important for national security and critical information infrastructure. On the strategic level, these issues are governed by the National Security Strategy, the latest version of which was adopted in 2021. There are also sectoral strategies, such as the National Energy Strategy. On the operational level, different sectors are regulated by sectoral legislation. For instance, the Law on Cyberswecurity and the government resolution on the objects of critical information infrastructure regulate the protection of these objects from cyberattacks.
Different ministries are responsible for the protection and upgrading of various types of critical infrastructure. The Ministry of Energy is responsible for energy infrastructure; the Ministry of Communications and Transport is in charge of protecting and upgrading transport and other relevant infrastructure; and the Ministry of Defense oversees cybersecurity and military infrastructure development. These policies are coordinated by the government, including during the drafting of yearly budgets.
Cybersecurity and ICT infrastructure have received positive assessments from international organizations. For instance, in the latest Global Cybersecurity ranking (2020), Lithuania was ranked sixth. The upgrading and development of ICT infrastructure, including high-speed internet networks, have benefited from foreign investors and strong competition among service providers, predominantly Nordic companies. However, the upgrading of transport infrastructure such as railways – the Rail Baltica project – and roads has been complicated by delays, often due to lengthy public procurement processes. EU funding provides a significant share of the funds used for upgrading infrastructure.
Citations:
The resolution of the Lithuanian parliament on the adoption of the National security strategy. 2021. No. XIV-795. https://www.e-tar.lt/portal/en/legalAct/f54863b0623a11eca9ac839120d251c4
Vilpišauskas, R. 2021. “Lithuania: Regulatory Patchwork That Evolved in Response to External Threats, Legal Approximation and Domestic Influences.” In Andžans, M., Spruds, A., Sverdrup, U., eds., Critical Infrastructure in the Baltic States and Norway: Strategies and Practices of Protection and Communication. Riga: Latvian Institute of International Affairs, 59-97. https://www.liia.lv/en/publications/critical-infrastructure-in-the-baltic-states-and-norway-strategies-and-practices-of-protection-and-communication-944?get_file=1
The Government Annual Report for 2022, 17 May 2023 (in Lithuanian), https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
Global Cyber Security Index, https://www.itu.int/en/ITU-D/Cybersecurity/Pages/global-cybersecurity-index.aspx
There is extensive regulation aimed at protecting objects important for national security and critical information infrastructure. On the strategic level, these issues are governed by the National Security Strategy, the latest version of which was adopted in 2021. There are also sectoral strategies, such as the National Energy Strategy. On the operational level, different sectors are regulated by sectoral legislation. For instance, the Law on Cyberswecurity and the government resolution on the objects of critical information infrastructure regulate the protection of these objects from cyberattacks.
Different ministries are responsible for the protection and upgrading of various types of critical infrastructure. The Ministry of Energy is responsible for energy infrastructure; the Ministry of Communications and Transport is in charge of protecting and upgrading transport and other relevant infrastructure; and the Ministry of Defense oversees cybersecurity and military infrastructure development. These policies are coordinated by the government, including during the drafting of yearly budgets.
Cybersecurity and ICT infrastructure have received positive assessments from international organizations. For instance, in the latest Global Cybersecurity ranking (2020), Lithuania was ranked sixth. The upgrading and development of ICT infrastructure, including high-speed internet networks, have benefited from foreign investors and strong competition among service providers, predominantly Nordic companies. However, the upgrading of transport infrastructure such as railways – the Rail Baltica project – and roads has been complicated by delays, often due to lengthy public procurement processes. EU funding provides a significant share of the funds used for upgrading infrastructure.
Citations:
The resolution of the Lithuanian parliament on the adoption of the National security strategy. 2021. No. XIV-795. https://www.e-tar.lt/portal/en/legalAct/f54863b0623a11eca9ac839120d251c4
Vilpišauskas, R. 2021. “Lithuania: Regulatory Patchwork That Evolved in Response to External Threats, Legal Approximation and Domestic Influences.” In Andžans, M., Spruds, A., Sverdrup, U., eds., Critical Infrastructure in the Baltic States and Norway: Strategies and Practices of Protection and Communication. Riga: Latvian Institute of International Affairs, 59-97. https://www.liia.lv/en/publications/critical-infrastructure-in-the-baltic-states-and-norway-strategies-and-practices-of-protection-and-communication-944?get_file=1
The Government Annual Report for 2022, 17 May 2023 (in Lithuanian), https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
Global Cyber Security Index, https://www.itu.int/en/ITU-D/Cybersecurity/Pages/global-cybersecurity-index.aspx
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How committed is the government to fully decarbonizing the energy system by 2050?
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The government is clearly committed to transitioning to a decarbonized energy system.
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The government is largely committed to transitioning to a decarbonized energy system.
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The government is somewhat committed to transitioning to a decarbonized energy system.
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The government is not at all committed to transitioning to a decarbonized energy system.
The government is largely committed to transitioning to a decarbonized energy system. In Lithuania, the National Energy Strategy adopted in 2018 has been the main strategic document in this field. This document includes targets for increasing the share of renewable energy. There is also a Law on Renewable Energy. In 2019, the National Energy and Climate Action Plan for 2021 – 2030 was adopted. The program of the current government, adopted in late 2020, sets the target of having 30% of energy produced by renewables by 2025 and increasing this share to 50% by 2030. According to the strategy, by 2050 Lithuania should be a climate-neutral country with a fully circular economy. A significant share of decarbonization-related investments are planned and are already being funded through the New Generation EU facility.
In 2022 – 2023, there has been an acceleration of wind and solar energy projects that could mean the targets will be reached earlier than planned. As noted in the report on Lithuania’s energy system transformation to 2050, presented in late 2023, there was a “sixfold increase in solar and twofold increase in wind capacity over the past few years” (DNV 2023). According to the European Commission’s 2023 country report on Lithuania, the country “has adopted a new legislative framework to improve institutional and legal mechanisms to promote the generation, transmission and consumption of electricity from renewable sources. This measure will improve the Lithuanian energy market by establishing a new framework for the sale of electricity and setting long-term renewable energy targets for all sectors. This will contribute to the development of renewable energy sources in Lithuania.”
The drive to increase the share of renewables was initially motivated by geopolitical concerns and the need to reduce reliance on supplies from Russia. More recently, however, it has been driven by optimism about technological progress, which projects significant potential for wind and solar-powered energy as well as the production of green hydrogen. Major energy sector companies envision that the development of renewable energy offers Lithuania an opportunity to become a regional hub. This would support the growth of a new generation of sustainable industry with a strong demand for green energy, which would allow the country to serve as a hub for exporting not only energy, but also carbon-free products and e-fuels across Europe.
Citations:
Ministry of Energy. “Information on Renewable Energy.” https://enmin.lrv.lt/en/sectoral-policy/renewable-energy-sources/legislation-2/
Ministry of Finance. “New Generation Lithuania (in Lithuanian).” https://finmin.lrv.lt/lt/es-ir-kitos-investicijos/naujos-kartos-lietuva
The Seimas. 2020. Resolution on the Program of the Eighteenth Government of Lithuania, No. XIV-72.
European Commission. 2023. “Country Report: Lithuania.” https://economy-finance.ec.europa.eu/publications/2023-country-report-lithuania_en
DNV. 2023. “Lithuania Energy System Transformation to 2050.” EPSO-G Energy System Transformation Strategy.
In 2022 – 2023, there has been an acceleration of wind and solar energy projects that could mean the targets will be reached earlier than planned. As noted in the report on Lithuania’s energy system transformation to 2050, presented in late 2023, there was a “sixfold increase in solar and twofold increase in wind capacity over the past few years” (DNV 2023). According to the European Commission’s 2023 country report on Lithuania, the country “has adopted a new legislative framework to improve institutional and legal mechanisms to promote the generation, transmission and consumption of electricity from renewable sources. This measure will improve the Lithuanian energy market by establishing a new framework for the sale of electricity and setting long-term renewable energy targets for all sectors. This will contribute to the development of renewable energy sources in Lithuania.”
The drive to increase the share of renewables was initially motivated by geopolitical concerns and the need to reduce reliance on supplies from Russia. More recently, however, it has been driven by optimism about technological progress, which projects significant potential for wind and solar-powered energy as well as the production of green hydrogen. Major energy sector companies envision that the development of renewable energy offers Lithuania an opportunity to become a regional hub. This would support the growth of a new generation of sustainable industry with a strong demand for green energy, which would allow the country to serve as a hub for exporting not only energy, but also carbon-free products and e-fuels across Europe.
Citations:
Ministry of Energy. “Information on Renewable Energy.” https://enmin.lrv.lt/en/sectoral-policy/renewable-energy-sources/legislation-2/
Ministry of Finance. “New Generation Lithuania (in Lithuanian).” https://finmin.lrv.lt/lt/es-ir-kitos-investicijos/naujos-kartos-lietuva
The Seimas. 2020. Resolution on the Program of the Eighteenth Government of Lithuania, No. XIV-72.
European Commission. 2023. “Country Report: Lithuania.” https://economy-finance.ec.europa.eu/publications/2023-country-report-lithuania_en
DNV. 2023. “Lithuania Energy System Transformation to 2050.” EPSO-G Energy System Transformation Strategy.
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To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
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Labor market institutions are not at all aligned with the goal of an adaptable labor market.
In Lithuania, labor market institutions align largely with the goal of an adaptable labor market. The most recent labor market reform occurred with the revision of the Labor Code in 2016, which made hiring and firing practices more flexible. However, both before and after the reform, the Lithuanian economy has demonstrated flexibility in adapting to external shocks such as the COVID-19 pandemic.
This flexibility results from the adaptability of companies rather than from the use of active labor market policies. There is a mismatch between the high demand for labor and restrictive immigration policies, which is frequently criticized by business associations. According to Eurostat, the unemployment rate in Lithuania in November 2023 was 6.5%, above the EU average of 5.9%. In its 2023 report on Lithuania, he European Commission noted the presence of skills mismatches, as well as the fact that tightness in the labor market – measured as the ratio of job vacancies to the number of unemployed people – had reached the highest level in the last 15 years. According to the Lithuanian Public Employment Service in December 2023, employers registered 8,400 available positions. Despite the influx of refugees from Belarus and Ukraine and active policies assisting their employment, there was a demand for employees in transport, construction and other service sectors.
The Lithuanian Public Employment Service acts as an intermediary between employers and employees. In December 2023, the Lithuanian Public Employment Service provided job offers to 12,300 individuals (while there were 1.45 million insured participants in the labor market). It also offers subsidies for training and educational programs. However, employers usually provide their own training services tailored to their particular needs.
In its 2023 report on Lithuania, the OECD recommended creating a framework to attract, develop, upgrade and retain skills that align more closely with labor market needs by strengthening firm-based learning, better balancing the attractiveness of firm-based and school-based learning, and benefiting from international firms’ experiences with apprenticeship systems.
Citations:
Kuokštis, V., and R. Vilpišauskas. 2022. “Economic Adaptability in the Absence of Democratic Corporatism: Explaining Lithuania’s Export Performance.” Politologija 108 (4): 116-157. https://doi.org/10.15388/Polit.2022.108.4
European Commission. 2023. “Country Report: Lithuania.” https://economy-finance.ec.europa.eu/publications/2023-country-report-lithuania_en
Lithuanian Public Employment Service. “https://uzt.lt/en” (accessed 15.01.2024)
European Commission. 2023. 2023 Country Report: Lithuania. Institutional Paper 239.
OECD. 2023. “Lithuania.” In Economic Policy Reforms 2023: Going for Growth. Paris: OECD Publishing.
DOI: https://doi.org/10.1787/910abee8-en
This flexibility results from the adaptability of companies rather than from the use of active labor market policies. There is a mismatch between the high demand for labor and restrictive immigration policies, which is frequently criticized by business associations. According to Eurostat, the unemployment rate in Lithuania in November 2023 was 6.5%, above the EU average of 5.9%. In its 2023 report on Lithuania, he European Commission noted the presence of skills mismatches, as well as the fact that tightness in the labor market – measured as the ratio of job vacancies to the number of unemployed people – had reached the highest level in the last 15 years. According to the Lithuanian Public Employment Service in December 2023, employers registered 8,400 available positions. Despite the influx of refugees from Belarus and Ukraine and active policies assisting their employment, there was a demand for employees in transport, construction and other service sectors.
The Lithuanian Public Employment Service acts as an intermediary between employers and employees. In December 2023, the Lithuanian Public Employment Service provided job offers to 12,300 individuals (while there were 1.45 million insured participants in the labor market). It also offers subsidies for training and educational programs. However, employers usually provide their own training services tailored to their particular needs.
In its 2023 report on Lithuania, the OECD recommended creating a framework to attract, develop, upgrade and retain skills that align more closely with labor market needs by strengthening firm-based learning, better balancing the attractiveness of firm-based and school-based learning, and benefiting from international firms’ experiences with apprenticeship systems.
Citations:
Kuokštis, V., and R. Vilpišauskas. 2022. “Economic Adaptability in the Absence of Democratic Corporatism: Explaining Lithuania’s Export Performance.” Politologija 108 (4): 116-157. https://doi.org/10.15388/Polit.2022.108.4
European Commission. 2023. “Country Report: Lithuania.” https://economy-finance.ec.europa.eu/publications/2023-country-report-lithuania_en
Lithuanian Public Employment Service. “https://uzt.lt/en” (accessed 15.01.2024)
European Commission. 2023. 2023 Country Report: Lithuania. Institutional Paper 239.
OECD. 2023. “Lithuania.” In Economic Policy Reforms 2023: Going for Growth. Paris: OECD Publishing.
DOI: https://doi.org/10.1787/910abee8-en
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
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Labor market institutions are fully aligned with the goal of an inclusive labor market.
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Labor market institutions are largely aligned with the goal of an inclusive labor market.
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Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
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Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Labor market institutions are largely aligned with the goal of an inclusive labor market. According to the Law on Unemployment Social Insurance, anyone who has paid social insurance contributions for at least one year out of the last two and a half years can register at the Lithuanian Public Employment Service to receive unemployment benefits if they were not offered a suitable job or active labor market policy measures. Unemployment benefits are paid once a month over a period of nine months. The amount is calculated by including a fixed sum, which amounts to 23.27% of the minimum monthly wage, and a variable component, which is calculated as a share of the average monthly insured income. This share starts at 38.79% during the first three months, then declines to 31.03% during the fourth to sixth months, and further decreases to 23.27% during the seventh to ninth months (Lithuanian Ministry of Social Security and Labor, 2024).
Such a method of calculating unemployment benefits is intended to encourage an active search for employment opportunities. However, according to the OECD (2024), financial disincentives to returning to work in Lithuania have been higher than the OECD average. These disincentives are calculated as the percentage of earnings lost to either higher taxes or lower benefits when a job-seeker returns to work after two months of unemployment.
Additionally, the Lithuanian Public Employment Service aims to offer training and jobs for unemployed individuals to facilitate their return to the labor market. Despite these efforts, most labor market participants find jobs on their own, often during their studies. Since most young people who graduate from secondary school seek to enter universities and colleges, the proportion of young people who are not in education, employment or training has been lower than the OECD average.
There are also rules allowing for part-time jobs. Flexible work arrangements, including remote work, are often negotiated between employees and employers.
Citations:
Lithuanian Ministry of Social Security and Labor. “Unemployment social insurance” (in Lithuanian). https://socmin.lrv.lt/lt/veiklos-sritys/socialinis-draudimas/socialinio-draudimo-ismokos/nedarbo-socialinis-draudimas?lang=lt
OECD. “Dataset: PTR for Families Claiming Unemployment Benefit.” https://stats.oecd.org/viewhtml.aspx?datasetcode=PTRUB&lang=en
Such a method of calculating unemployment benefits is intended to encourage an active search for employment opportunities. However, according to the OECD (2024), financial disincentives to returning to work in Lithuania have been higher than the OECD average. These disincentives are calculated as the percentage of earnings lost to either higher taxes or lower benefits when a job-seeker returns to work after two months of unemployment.
Additionally, the Lithuanian Public Employment Service aims to offer training and jobs for unemployed individuals to facilitate their return to the labor market. Despite these efforts, most labor market participants find jobs on their own, often during their studies. Since most young people who graduate from secondary school seek to enter universities and colleges, the proportion of young people who are not in education, employment or training has been lower than the OECD average.
There are also rules allowing for part-time jobs. Flexible work arrangements, including remote work, are often negotiated between employees and employers.
Citations:
Lithuanian Ministry of Social Security and Labor. “Unemployment social insurance” (in Lithuanian). https://socmin.lrv.lt/lt/veiklos-sritys/socialinis-draudimas/socialinio-draudimo-ismokos/nedarbo-socialinis-draudimas?lang=lt
OECD. “Dataset: PTR for Families Claiming Unemployment Benefit.” https://stats.oecd.org/viewhtml.aspx?datasetcode=PTRUB&lang=en
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
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Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
Labor market institutions are primarily focused on protecting individuals from labor market risks. The availability of unemployment benefits depends on the individual’s employment record. Although the requirement is not demanding – to be eligible, an individual must have been employed for at least one year during the last 2.5 years – it may pose a risk for some. The long-term unemployment rate in Lithuania has been higher than the OECD average.
Only a small share of employees are members of trade unions, and it is a dominant practice to negotiate wage and other employment conditions individually. According to the OECD, trade union density was 7.4% in 2019, while employer organization density was 33% in 2016. The portability of social rights is affected by EU-wide regulations (OECD and AIAS 2021).
Citations:
Lithuanian Ministry of Social Security and Labor. “Unemployement social insurance (in Lithuanian).” https://socmin.lrv.lt/lt/veiklos-sritys/socialinis-draudimas/socialinio-draudimo -ismokos/nedarbo-socialinis-draudimas?lang=lt
OECD and AIAS. 2021. Institutional Characteristics of Trade Unions, Wage Setting, State.
Intervention and Social Pacts, Lithuania. OECD Publishing, Paris. www.oecd.org/employment/ictwss-database.htm
Only a small share of employees are members of trade unions, and it is a dominant practice to negotiate wage and other employment conditions individually. According to the OECD, trade union density was 7.4% in 2019, while employer organization density was 33% in 2016. The portability of social rights is affected by EU-wide regulations (OECD and AIAS 2021).
Citations:
Lithuanian Ministry of Social Security and Labor. “Unemployement social insurance (in Lithuanian).” https://socmin.lrv.lt/lt/veiklos-sritys/socialinis-draudimas/socialinio-draudimo -ismokos/nedarbo-socialinis-draudimas?lang=lt
OECD and AIAS. 2021. Institutional Characteristics of Trade Unions, Wage Setting, State.
Intervention and Social Pacts, Lithuania. OECD Publishing, Paris. www.oecd.org/employment/ictwss-database.htm
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
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The tax system is fully aligned with the goals of ensuring adequate tax revenues.
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The tax system is largely aligned with the goals of ensuring adequate tax revenues.
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The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
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The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
The tax system is largely aligned with the goal of ensuring adequate tax revenues. A significant portion of government revenue comes from indirect taxes, especially the value-added tax (VAT), which is relatively high at 21% (up from 18% during the financial crisis a decade and a half ago). Meanwhile, environmental and property tax rates are relatively low. Taxes on labor (personal income tax and social security contributions) present a barrier to the competitiveness of Lithuanian businesses. According to the OECD, in 2022 the average rate of income tax and employees’ social security contributions in Lithuania was 37.11%, compared to the OECD average of 27%.
Despite high average tax rates on labor income, tax revenue as a percentage of GDP is below the OECD average, constituting the third-lowest such figure in the EU. This is the result of a highly differentiated, or as the World Bank calls it in its recent assessment, schedular tax system, in which statutory and effective tax rates vary significantly between legal forms of economic activity (employment contracts, individual activity certificates, etc.) and between sources of income (wages, capital gains, etc.).
Furthermore, although its overall incidence is declining, significant tax evasion persists. According to the European Commission, the VAT gap (as a percentage of theoretical VAT liability) remains significantly higher than the EU average – in 2020, it was the fifth-highest such figure in the EU. The current coalition government, in its program adopted in late 2020, committed to reducing the VAT gap from 25% to 10%. However, the target date for achieving this goal is 2030 – well beyond the term of the current government.
According to the Tax Justice Network, tax administration capacity in Lithuania was below the OECD average in 2022 (respectively with index indicator scores of 40 and 47). Potential tax revenues are still influenced by the country’s significant shadow economy (estimated at 22.4% of all economic activity in 2022), extensive tax avoidance, widespread tax exemptions and low tax morale. An improvement in VAT and excise tax collection has been noted in recent years; this is attributed partially to improvements in tax administration and partially to a reduction in fuel and tobacco-product smuggling from Russia’s Kaliningrad region and Belarus (due to the general decline in trade with those countries).
In 2022, the government adopted changes to the Law on Tax Administration and related legal norms regarding the protection of taxpayers’ data, expanding the list of sanctions to further reduce tax evasion and the VAT gap.
Citations:
OECD: Dataset: Taxing Wages – Comparative tables URL: https://stats.oecd.org/Index.aspx?DataSetCode=AWCOMP#
European Commission. 2022. “VAT Gap Report 2022.” DOI: 10.2778/87504
Schneider, F., and A. Asslani. 2022. Taxation of the Informal Economy in the EU. Publication for the Economic and Monetary Affairs Subcommittee on tax matters (FISC), Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg.
Tax Justice Network URL: https://iff.taxjustice.net/#/explorer
World Bank. 2022. TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania. Output 1.
Despite high average tax rates on labor income, tax revenue as a percentage of GDP is below the OECD average, constituting the third-lowest such figure in the EU. This is the result of a highly differentiated, or as the World Bank calls it in its recent assessment, schedular tax system, in which statutory and effective tax rates vary significantly between legal forms of economic activity (employment contracts, individual activity certificates, etc.) and between sources of income (wages, capital gains, etc.).
Furthermore, although its overall incidence is declining, significant tax evasion persists. According to the European Commission, the VAT gap (as a percentage of theoretical VAT liability) remains significantly higher than the EU average – in 2020, it was the fifth-highest such figure in the EU. The current coalition government, in its program adopted in late 2020, committed to reducing the VAT gap from 25% to 10%. However, the target date for achieving this goal is 2030 – well beyond the term of the current government.
According to the Tax Justice Network, tax administration capacity in Lithuania was below the OECD average in 2022 (respectively with index indicator scores of 40 and 47). Potential tax revenues are still influenced by the country’s significant shadow economy (estimated at 22.4% of all economic activity in 2022), extensive tax avoidance, widespread tax exemptions and low tax morale. An improvement in VAT and excise tax collection has been noted in recent years; this is attributed partially to improvements in tax administration and partially to a reduction in fuel and tobacco-product smuggling from Russia’s Kaliningrad region and Belarus (due to the general decline in trade with those countries).
In 2022, the government adopted changes to the Law on Tax Administration and related legal norms regarding the protection of taxpayers’ data, expanding the list of sanctions to further reduce tax evasion and the VAT gap.
Citations:
OECD: Dataset: Taxing Wages – Comparative tables URL: https://stats.oecd.org/Index.aspx?DataSetCode=AWCOMP#
European Commission. 2022. “VAT Gap Report 2022.” DOI: 10.2778/87504
Schneider, F., and A. Asslani. 2022. Taxation of the Informal Economy in the EU. Publication for the Economic and Monetary Affairs Subcommittee on tax matters (FISC), Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, Luxembourg.
Tax Justice Network URL: https://iff.taxjustice.net/#/explorer
World Bank. 2022. TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania. Output 1.
To what extent do existing tax institutions and procedures consider equity aspects?
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9
9
The tax system is fully aligned with the goal of ensuring equity.
8
7
6
7
6
The tax system is largely aligned with the goal of ensuring equity.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of ensuring equity.
2
1
1
The tax system is not at all aligned with the goal of ensuring equity.
The tax system is largely aligned with the goal of ensuring equity. In terms of horizontal equity, there are mismatches between various groups of economic actors with similar tax-paying abilities. Labor is taxed somewhat more heavily than capital, while specific groups such as farmers and lawyers benefit from tax exemptions.
In a recent assessment of the Lithuanian tax system, the World Bank (2022) calculated over 72 differentiated tax treatments by type of entity, size, type of activity and source of income (capital/labor). Previous governments have reduced the number of exemptions provided to various professions and economic activities with regard to personal income tax, social security contributions and VAT. Social security contribution rates were reduced after the 2019 reform, but the personal income tax rate was increased. Ceilings on these contributions, reintroduced in 2019, start at a very high level but are gradually decreased.
Overall, the tax system’s capacity for vertical equity and redistribution is relatively limited in Lithuania. The system places a higher tax burden on those with a greater ability to pay taxes, as large companies pay more substantial sums than do small companies. For many years, Lithuania had a flat income tax rate of 15%. However, this was changed to a progressive structure with two brackets: 20% and 32%. Progressivity is further enhanced by an untaxed income threshold, which benefits lower-wage earners.
Nevertheless, only wages are taxed progressively; income derived from individual activity certificates, business certificates and dividends is not. As a result, when total income is skewed toward dividends and individual activity certificates, the impact of progressive tax rates is significantly weakened. According to a World Bank study, the effective tax rate on income steadily increases between approximately the 20th and 90th income percentiles but declines above that level.
In 2021 the current coalition government initiated a process of tax reform aimed at enhancing equity, particularly horizontal equity. This involved reducing existing tax exemptions for certain types of businesses and expanding the base for the real estate tax. However, these reform proposals did not receive support from the liberal members of the governing coalition, and faced criticism from business associations. A tax reform plan in 2023 was not implemented due to a lack of support in the parliament. Nevertheless, the legislature agreed to increase the untaxed income threshold by 20% starting in 2024 for individuals earning up the level of the average monthly wage.
Citations:
World Bank. 2022. “TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania.”
In a recent assessment of the Lithuanian tax system, the World Bank (2022) calculated over 72 differentiated tax treatments by type of entity, size, type of activity and source of income (capital/labor). Previous governments have reduced the number of exemptions provided to various professions and economic activities with regard to personal income tax, social security contributions and VAT. Social security contribution rates were reduced after the 2019 reform, but the personal income tax rate was increased. Ceilings on these contributions, reintroduced in 2019, start at a very high level but are gradually decreased.
Overall, the tax system’s capacity for vertical equity and redistribution is relatively limited in Lithuania. The system places a higher tax burden on those with a greater ability to pay taxes, as large companies pay more substantial sums than do small companies. For many years, Lithuania had a flat income tax rate of 15%. However, this was changed to a progressive structure with two brackets: 20% and 32%. Progressivity is further enhanced by an untaxed income threshold, which benefits lower-wage earners.
Nevertheless, only wages are taxed progressively; income derived from individual activity certificates, business certificates and dividends is not. As a result, when total income is skewed toward dividends and individual activity certificates, the impact of progressive tax rates is significantly weakened. According to a World Bank study, the effective tax rate on income steadily increases between approximately the 20th and 90th income percentiles but declines above that level.
In 2021 the current coalition government initiated a process of tax reform aimed at enhancing equity, particularly horizontal equity. This involved reducing existing tax exemptions for certain types of businesses and expanding the base for the real estate tax. However, these reform proposals did not receive support from the liberal members of the governing coalition, and faced criticism from business associations. A tax reform plan in 2023 was not implemented due to a lack of support in the parliament. Nevertheless, the legislature agreed to increase the untaxed income threshold by 20% starting in 2024 for individuals earning up the level of the average monthly wage.
Citations:
World Bank. 2022. “TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania.”
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
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9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
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7
6
The tax system is largely aligned with the goal of minimizing compliance and collection costs.
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4
3
4
3
The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
2
1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
The tax system is largely aligned with the goal of minimizing compliance and collection costs. The use of the electronic system of tax declaration and payments has contributed to making tax compliance easier for taxpayers. The culture of the State Tax Inspection has also evolved into a focus on assisting taxpayers rather than focusing on sanctions. However, the existence of different types of tax treatments by entity type and size, type of activity, and sources of income (capital/labor) makes tax compliance more costly.
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
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9
9
The tax system is fully aligned with the goal of internalizing externalities.
8
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6
7
6
The tax system is largely aligned with the goal of internalizing externalities.
5
4
3
4
3
The tax system is only somewhat aligned with the goal of internalizing externalities.
2
1
1
The tax system is not at all aligned with the goal of internalizing externalities.
Many analysts and several international institutions, such as the IMF and the OECD, have for many years been recommending both shifting and expanding the tax burden to somewhat reduce labor taxation and instead increase property and environmental tax rates. Lithuania’s taxes in these areas are among the European Union’s least ambitious. The minister of environment in 2021 proposed a revamp to car taxation by abolishing the registration tax and introducing an annual tax, which would then be gradually increased over the succeeding years. He suggested it as a way of addressing negative externalities and reducing emissions, although opponents criticized the tax for not targeting the precise externalities and for being regressive. The parliament rejected the proposal in early 2022 amid disagreement among coalition partners and criticism from the opposition.
In 2023, the parliament adopted the increase of excise duties for certain types of fossil fuels, slated to come into effect in 2024 and later. The policy includes the abolishment of existing excise tax exemptions for certain types of fossils fuels, increases in the excise tax rate for diesel fuel, and increases in the excise tax rate for gasoline over time. However, the resulting public discontent made it likely that some of these policies would be withdrawn in the 1st half of 2024. Beginning in 2024, excise taxes on different types of alcohol were also increased.
There is also a reduced profit tax rate applied for investments in research and innovation. This policy is intended to motivate businesses to invest in such activities, which are associated with positive externalities. However, not all taxes intended to internalize positive externalities have functioned this way; rather, since they have not been abolished, they have become likely sources of negative externalities. One example is a reduced corporate income tax rate for micro enterprises, which was intended to incentivize their growth but instead provoked a bunching of enterprises at the threshold of the higher tax rate, while also producing incentives for engaging in other sorts of unproductive activities.
Citations:
World Bank. 2022. “TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania. Output 2.”
Kalanta, Marius. 2021. “Special Corporate Income Tax Rate for Micro-Enterprises in Lithuania: Productive or Unproductive Incentive?” Enterprise Lithuania Report. Vilnius.
In 2023, the parliament adopted the increase of excise duties for certain types of fossil fuels, slated to come into effect in 2024 and later. The policy includes the abolishment of existing excise tax exemptions for certain types of fossils fuels, increases in the excise tax rate for diesel fuel, and increases in the excise tax rate for gasoline over time. However, the resulting public discontent made it likely that some of these policies would be withdrawn in the 1st half of 2024. Beginning in 2024, excise taxes on different types of alcohol were also increased.
There is also a reduced profit tax rate applied for investments in research and innovation. This policy is intended to motivate businesses to invest in such activities, which are associated with positive externalities. However, not all taxes intended to internalize positive externalities have functioned this way; rather, since they have not been abolished, they have become likely sources of negative externalities. One example is a reduced corporate income tax rate for micro enterprises, which was intended to incentivize their growth but instead provoked a bunching of enterprises at the threshold of the higher tax rate, while also producing incentives for engaging in other sorts of unproductive activities.
Citations:
World Bank. 2022. “TSI Project 20LT09 Micro Enterprises and Self-employed Tax Regulatory Assessment for Removing Hurdles to Growth: Report Assessing the Impacts of Tax Optimization and Bunching in MEs and Self-employed and Legal Entities Responses to Size-based Tax Rates in Lithuania. Output 2.”
Kalanta, Marius. 2021. “Special Corporate Income Tax Rate for Micro-Enterprises in Lithuania: Productive or Unproductive Incentive?” Enterprise Lithuania Report. Vilnius.
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
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Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
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Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
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3
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3
Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
2
1
1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting. Lithuanian governments have been following EU fiscal rules, although with certain temporary derogations during the 2008 – 2009 crisis and the COVID-19 pandemic, as well as during the several years when EU Stability and Growth Pact rules were suspended.
As noted by the European Commission (2023), in 2022 the energy price shock impacted public finances at a time when they had not fully recovered from the pandemic. Still, the budget deficit is projected to remain under the ceiling of 3% of GDP in 2024, while debt was projected to be 37.1% of GDP in 2023, and was expected to decrease slightly to 36.6% in 2024.
In the long run, Lithuania faces several challenges in maintaining sustainable public finances. Russia’s war against Ukraine in 2022 underscored the necessity of allocating more resources to defense. The sum expended on this sector has already been steadily increasing since 2014. In 2023, defense expenditure reached around 2.7% of the country’s GDP. However, this was partly achieved through a temporary tax on bank profits, which have grown significantly due to interest rate increases by the ECB in 2022 – 2023. Other permanent sources of funding will be needed to sustain increases in defense expenditures in the future, and the political debate on this is ongoing.
More generally, factors such as projected expenditures and potentially lower tax revenues related to an aging population, a relatively restrictive immigration regime, and the vulnerability of the country’s small and open economy to external shocks pose significant risks. The government is revising the state budgeting system to extend the time horizon for budgeting and strengthen the link between expenditure and overall economic policy. Better-than-forecast economic developments during the COVID-19 pandemic and accelerating rates of inflation allowed the government to collect more tax revenues than planned, and thereby increase funding for wages in the education and healthcare sectors, as well as pensions, in the 2022 – 2024 period.
As noted by many observers and politicians, there is a fundamental tension within the Lithuanian fiscal regime due to a mismatch between the state’s extensive obligations and existing tax income, which is not sufficient to finance those obligations adequately. Although the government has launched a tax reform process, it became evident by the end of 2023 that this reform would not be adopted by parliament, partly because of the tensions created by the election cycle, with the next elections scheduled for 2024.
Citations:
European Commission. 2023. “2023 Country Report: Lithuania. Institutional Paper 239.”
As noted by the European Commission (2023), in 2022 the energy price shock impacted public finances at a time when they had not fully recovered from the pandemic. Still, the budget deficit is projected to remain under the ceiling of 3% of GDP in 2024, while debt was projected to be 37.1% of GDP in 2023, and was expected to decrease slightly to 36.6% in 2024.
In the long run, Lithuania faces several challenges in maintaining sustainable public finances. Russia’s war against Ukraine in 2022 underscored the necessity of allocating more resources to defense. The sum expended on this sector has already been steadily increasing since 2014. In 2023, defense expenditure reached around 2.7% of the country’s GDP. However, this was partly achieved through a temporary tax on bank profits, which have grown significantly due to interest rate increases by the ECB in 2022 – 2023. Other permanent sources of funding will be needed to sustain increases in defense expenditures in the future, and the political debate on this is ongoing.
More generally, factors such as projected expenditures and potentially lower tax revenues related to an aging population, a relatively restrictive immigration regime, and the vulnerability of the country’s small and open economy to external shocks pose significant risks. The government is revising the state budgeting system to extend the time horizon for budgeting and strengthen the link between expenditure and overall economic policy. Better-than-forecast economic developments during the COVID-19 pandemic and accelerating rates of inflation allowed the government to collect more tax revenues than planned, and thereby increase funding for wages in the education and healthcare sectors, as well as pensions, in the 2022 – 2024 period.
As noted by many observers and politicians, there is a fundamental tension within the Lithuanian fiscal regime due to a mismatch between the state’s extensive obligations and existing tax income, which is not sufficient to finance those obligations adequately. Although the government has launched a tax reform process, it became evident by the end of 2023 that this reform would not be adopted by parliament, partly because of the tensions created by the election cycle, with the next elections scheduled for 2024.
Citations:
European Commission. 2023. “2023 Country Report: Lithuania. Institutional Paper 239.”
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
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9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
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6
7
6
The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
5
4
3
4
3
The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
2
1
1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
The government is committed to utilizing research and innovation as drivers for transitioning to a sustainable economy and society. Lithuanian authorities have used EU structural funds to improve the country’s R&D infrastructure. More recently, in 2022 – 2023, investments into green and digital transitions have been supplemented by Next Generation EU funding. Science clusters have been developed, integrating higher-education institutions, research centers and business areas working within specific scientific or technological domains.
However, efficiently using this new research infrastructure remains a major challenge, and cooperation between industry and research organizations is still weak. The government has supported the sector through financial incentives, particularly an R&D tax credit for enterprises, as well as regulatory measures. The current government program includes numerous provisions dedicated to the sustainability agenda. Both the previous and current governments have allocated budgetary resources to increasing salaries for university researchers, with the latest decisions to come progressively into force in 2024.
Demand-side measures encouraging innovation are less developed. Bureaucratic procedures remain an obstacle to research and innovation. The existing system of innovation governance is complex, with limited synergies between the various implementing agencies and support schemes. Due to insufficient funding and the rules for calculating the salaries of scholars participating in EU-funded programs such as Horizon 2020, incentives to apply to these programs are weak.
In the Ecorys (2022) report on Lithuania’s eco-innovation profile, the country is categorized as an average eco-innovations performer. The report notes that Lithuania’s performance relative to the EU has improved over time. Similar trends are highlighted by the European Innovation Scoreboard 2023, which places Lithuania in the group of moderate innovators. Although Lithuania’s performance remains below the average for the moderate innovators group, its rate of increase between 2016 and 2023 was higher than the EU average.
In 2022, the government established an Innovations Agency responsible for supporting innovations in all stages of business development and made structural changes such as merging the Agency of Science, Technology and Innovations with the Research Council of Lithuania, which was allocated more resources. A new program for scientific research, experimental development and innovation was adopted. Additionally, the government established a mission-driven model of science and innovation to foster cooperation between research institutions and businesses in three areas, one of which is called “Smart and Climate-Neutral Lithuania” (The Government Annual Report for 2022, 2023).
Citations:
The Seimas. 2020. “The Resolution on The Program of the Eighteenth Government of Lithuania” (in Lithuanian), December 11. No. XIV-72.
European Commission. 2023. “European Innovation Scoreboard 2023. Country Profile Lithuania. Brussels.”
Spudytė, I. 2022. “Eco-Innovation Country Profile 2022: Lithuania.” Ecorys.
The Government of Lithuania. 2023. “The Government Annual Report for 2022,” 17 May (in Lithuanian), https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
However, efficiently using this new research infrastructure remains a major challenge, and cooperation between industry and research organizations is still weak. The government has supported the sector through financial incentives, particularly an R&D tax credit for enterprises, as well as regulatory measures. The current government program includes numerous provisions dedicated to the sustainability agenda. Both the previous and current governments have allocated budgetary resources to increasing salaries for university researchers, with the latest decisions to come progressively into force in 2024.
Demand-side measures encouraging innovation are less developed. Bureaucratic procedures remain an obstacle to research and innovation. The existing system of innovation governance is complex, with limited synergies between the various implementing agencies and support schemes. Due to insufficient funding and the rules for calculating the salaries of scholars participating in EU-funded programs such as Horizon 2020, incentives to apply to these programs are weak.
In the Ecorys (2022) report on Lithuania’s eco-innovation profile, the country is categorized as an average eco-innovations performer. The report notes that Lithuania’s performance relative to the EU has improved over time. Similar trends are highlighted by the European Innovation Scoreboard 2023, which places Lithuania in the group of moderate innovators. Although Lithuania’s performance remains below the average for the moderate innovators group, its rate of increase between 2016 and 2023 was higher than the EU average.
In 2022, the government established an Innovations Agency responsible for supporting innovations in all stages of business development and made structural changes such as merging the Agency of Science, Technology and Innovations with the Research Council of Lithuania, which was allocated more resources. A new program for scientific research, experimental development and innovation was adopted. Additionally, the government established a mission-driven model of science and innovation to foster cooperation between research institutions and businesses in three areas, one of which is called “Smart and Climate-Neutral Lithuania” (The Government Annual Report for 2022, 2023).
Citations:
The Seimas. 2020. “The Resolution on The Program of the Eighteenth Government of Lithuania” (in Lithuanian), December 11. No. XIV-72.
European Commission. 2023. “European Innovation Scoreboard 2023. Country Profile Lithuania. Brussels.”
Spudytė, I. 2022. “Eco-Innovation Country Profile 2022: Lithuania.” Ecorys.
The Government of Lithuania. 2023. “The Government Annual Report for 2022,” 17 May (in Lithuanian), https://epilietis.lrv.lt/lt/naujienos/seimui-teikiama-vyriausybes-2022-metu-veiklos-ataskaita
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
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9
9
The government is clearly committed to ensuring the stability of the global financial system.
8
7
6
7
6
The government is largely committed to ensuring the stability of the global financial system.
5
4
3
4
3
The government is somewhat committed to ensuring the stability of the global financial system.
2
1
1
The government is not at all committed to ensuring the stability of the global financial system.
The government is largely committed to ensuring the stability of the global financial system. Lithuanian authorities contribute to improving financial market regulation and supervision. The Lithuanian Ministry of Finance and the Bank of Lithuania (the country’s central bank) are involved in the activities of EU institutions and arrangements dealing with international financial markets, participating in the European Council, the European Commission, the European Systemic Risk Board’s (ESRB) Advisory Technical Committee and the European supervisory authorities.
Lithuanian authorities are involved in the activities of more than 150 committees, working groups and task forces set up by the European Council, the European Commission, the ESRB’s Advisory Technical Committee and other European supervisory authorities. Lithuanian authorities support inclusive euro zone decision-making, which includes EU members that are not in the euro area, as well as the completion of the banking union.
In addition, the Bank of Lithuania cooperates with various international financial institutions and foreign central banks, providing technical assistance to central banks located in the EU’s eastern neighbors. Lithuania’s Financial Crime Investigation Service collaborates with EU institutions, international organizations and other governments on the issue of money laundering. The country supports many initiatives regarding the effective regulation and supervision of financial markets.
In recent years, the Bank of Lithuania has tightened regulation of short-term lending practices to target fast-credit companies and attract foreign financial institutions. Concurrently, the Bank of Lithuania has sought to attract fintech companies to Lithuania in the wake of the United Kingdom’s withdrawal from the EU. However, Lithuanian authorities have recently shifted their focus to emphasize risk control over expansion.
An important goal has been to foster competition in a banking sector heavily dominated by Nordic banks. Lithuania is regarded as having one of the world’s most highly developed regulatory frameworks for the fintech sector. Recently, the Bank of Lithuania initiated debates on establishing Lithuania as a center of excellence for anti-money laundering activities.
Lithuanian authorities are involved in the activities of more than 150 committees, working groups and task forces set up by the European Council, the European Commission, the ESRB’s Advisory Technical Committee and other European supervisory authorities. Lithuanian authorities support inclusive euro zone decision-making, which includes EU members that are not in the euro area, as well as the completion of the banking union.
In addition, the Bank of Lithuania cooperates with various international financial institutions and foreign central banks, providing technical assistance to central banks located in the EU’s eastern neighbors. Lithuania’s Financial Crime Investigation Service collaborates with EU institutions, international organizations and other governments on the issue of money laundering. The country supports many initiatives regarding the effective regulation and supervision of financial markets.
In recent years, the Bank of Lithuania has tightened regulation of short-term lending practices to target fast-credit companies and attract foreign financial institutions. Concurrently, the Bank of Lithuania has sought to attract fintech companies to Lithuania in the wake of the United Kingdom’s withdrawal from the EU. However, Lithuanian authorities have recently shifted their focus to emphasize risk control over expansion.
An important goal has been to foster competition in a banking sector heavily dominated by Nordic banks. Lithuania is regarded as having one of the world’s most highly developed regulatory frameworks for the fintech sector. Recently, the Bank of Lithuania initiated debates on establishing Lithuania as a center of excellence for anti-money laundering activities.