Freedom ... Liberal-conservatives will heavily tax your home and other property. You will be free to sleep outside by the fence and smoke marijuana

 "The effectiveness of property taxes in increasing the financial autonomy of the municipality was discussed at the meeting on Wednesday. As the Minister of Finance Gintarė Skaistė said at the beginning, it is proposed to direct taxes on non-commercial property from the state to municipal budgets. "Funds could be used to strengthen regional infrastructure. Then and municipalities would be interested in increasing the value of real estate, as well as infrastructure around. At the same time, we would give self-government more rights by introducing various benefits. Currently, most benefits are enshrined in law. It seems to me that municipalities are the entities that see best what is closest to them and could tell if benefits are needed. 

The last argument is that the real estate tax is one of the most important instruments that could slow down the growth of real estate prices. It seems to me that this is one of the topical issues that is important to keep in mind when considering this time, ”she said. 

Current situation 

Deputy Minister R. Bilkštytė explained that property taxes have several advantages. "It is a more growth-friendly system, a sustainable source of tax revenue, contributes to reducing property inequality, achieves environmental goals, increases the efficiency of real estate use, has a potential impact on housing price stability and household incentives to borrow (for example, to take a loan or mortgage)", - she said. The Deputy Minister taught that currently property taxes in Lithuania amount to 0.3 percent. gross domestic product, with an average of around 1.2% in the European Union of GDP. “In 2019, the Council of Europe recommended that Lithuania expand its tax base by switching to sources whose taxation is less detrimental to economic growth. In 2020, the Organization for Economic Co-operation and Development called for an increase in municipal revenues, including property taxation, in order to achieve regional development in Lithuania,” - she reminded. R. Bilkštytė said that currently commercial real estate taxation is from 0.5 to 3 percent, and the specific rate is set by municipal councils, taking into account the criteria established by law. The benefits are enshrined in law, and the entire tax is credited to municipal budgets. "In 2020, there were 55.8 thousand. taxpayers, collected 102.1 million. euro tax. The State Tax Inspectorate prepares a declaration and the person has to pay, she said. - The land tax also ranges from 0.01 to 4%, which is also set by municipal councils. The benefits are enshrined in law and municipalities do not have the right to refuse them. For 2020, 1.0277 mln. declarations, 37.9 million were paid. euro tax. The STI also prepares a declaration. 

As for non-commercial real estate, the situation is different. Tariffs are progressive, from 0.5 to 2 percent. Non-commercial property belonging to natural persons, the value of which does not exceed 150 thousand EUR (for persons with 3 or disabled children the limit is 200 thousand euros) is not taxed. The tax is credited to the state budget. For 2020, the fee was paid by 12.6 thousand. taxpayers, paid 5.1 mln. and the STI does not prepare declarations ”. 

 Changes under consideration 

R. Bilkštytė pointed out that many proposals were received from the society regarding property taxes. "Regarding real estate, it was proposed to waive most of the benefits, to leave only to socially vulnerable groups, to give up benefits to religious communities, to tax unfinished construction, not to apply benefits to abandoned property. With regard to the land tax, it was proposed to abandon the provision that the tax value of agricultural land is multiplied by a coefficient of 0.35, to abandon the benefits for farmers, religious communities, to tax forest land, ”she said. 

It was stated at the meeting that 153 persons could benefit from the benefit of educational institutions in 2020, the budget lost 90 thousand. 404 persons (-30 thousand euros), social services - 1549 persons (-900 thousand euros), agricultural activities - 4375 persons (-1.9 million euros). According to the Deputy Minister, the Ministry is currently considering including forest land in the tax object, reducing the value of this land by 50-70%. At present, such land is not subject to taxes. 

"It is also necessary to increase the coefficient that is applied to agricultural land. Now 0.35 percent is applied, and in 2020 it was used by persons for whom 816.4 thousand were formed. declarations, the budget lost 40 million. euros. In order to avoid long-term construction, it is considered not to apply the exemption if 10 years have passed since the issuance of the construction permit or 5 years the data in the real estate register have not been adjusted. Real estate that is not actually used is now tax-free. The benefit applies to 84 thousands objects, losses amount to 14 mln. euros,” - said R. Bilkštytė. 

Three alternatives 

R. Bilkštytė also told about the fact that in international practice the benefits applied to non-commercial property are related to the main residential housing. "In Portugal or Italy, for example, it is not taxed at all. Other models in Finland, Poland, where a lower tax rate applies. In Slovenia and Greece, taxation is limited to area and value. Latvia and Italy apply a tax credit (tax reduction) depending on the number of dependents, while Bulgaria reduces the value of basic housing. In Luxembourg or the Netherlands, the right to decide on benefits is transferred to the municipality. In Australia, Chile, Slovakia, and some U.S. states, the tax is reduced for low-income earners. In Sweden, there are benefits for new homes, in the Czech Republic for renovated, energy-efficient homes, ”she explained. 

For its part, the Ministry of Finance in Lithuania is currently considering several alternatives. "Under one option, the current tax model could be maintained with consideration of the effectiveness of the current tax-free value limit. According to another, in order to have a significant impact on strengthening the financial autonomy of municipalities, the linking of the non-commercial real estate tax relief with the main residential housing could be assessed. Alternatives to the benefit model are considered: a lower rate for main person's house; exempt basic housing; to apply the tax-free rate to the main dwelling according to the municipalities. 

At the same time, to consider a separate non-taxable amount for a non-commercial real estate other than the main residential real estate (by law or leaving it to the municipality), ”said R. Bilkštytė. She stated that the first alternative, the ministry would offer 150 thousand euros value untaxed.  "It is noticeable that for socially vulnerable groups (large families with low incomes, pensioners) the tax could be further reduced," the rapporteur warned. 

Under the second alternative, residential housing would be completely tax-free and other housing would be taxed at a higher rate. "The mechanism of application of the benefit would be easy for the majority of the society to understand, it would be easy to administer, but the benefit would not be socially oriented and would not promote regional development, the relative residents with the most expensive assets would receive the largest benefit," said R. Bilkštytė. 

Under the third alternative, the tax-free value could be determined by the municipalities. “All non-commercial real estate would be taxed, except for residential housing, depending on its value. This would strengthen the interest of municipalities in improving the value of real estate, create favorable opportunities to flexibly adapt to the specifics of the real estate market and social realities of individual municipalities, but additional social tensions are likely, "said R. Bilkštytė." 

What are the biggest problems for the Lithuanian people here: 

 "As you know, real estate does not generate the income needed to pay the tax that applies to it. Lithuania leads in the European Union in terms of the number of people of retirement age who own real estate. 

It is no secret that people are buying second and third homes today as a future pension "fund". Seeing that the activities of the existing pension funds are constantly being narrowed down, the pension procedure is being changed, they are looking for solutions to take care of their old age. The people see accumulation in the form of real estate as the best way out. When considering different tax alternatives for these people, their financial sustainability and social sympathies also need to be considered."