Additional tax on banks. “The situation has become critical”

Lithuanian Central Bank President Gediminas Simkus and Lithuanian Finance Minister Gintare Skaiste said on Monday that the introduction of an additional tax covering the banking sector is a realistic scenario. “The situation is critical. We are in a high interest rate environment so there are windfalls. If that happens in 2023, Simkus said, a way should be found to reallocate the windfall through fiscal solutions.

Lithuania is looking for money for the army

According to the statements of the Lithuanian authorities, the money received from the tax on excess profits will be spent on defense.

“The war in Ukraine and the reaction of countries to it has led to a lot of liquidity and high interest rates. The invasion also leads to an increase in defense spending, so if we tax windfall profits, the proceeds will be used for defense,” Gintare Skaiste said at a press conference.

Banks are reacting

British fintech company Revolut owns the third largest bank, with about a fifth of all assets. Clients from Lithuania make up about 2 percent. her base.

Two Swedish groups own more than 50 percent of the shares. Lithuanian banking assets: Swedbank, whose profit increased by 64 percent in 2022. to 148 million euros, and SEB, whose profit increased by 49%. up to 172 million euros. The Association of Lithuanian Banks said it was too early to predict bank profits in 2023.

“In the current situation, we see that various geopolitical and macroeconomic factors can affect individual sectors of the economy in different ways,” the association said in a statement, which does not explicitly mention the announcement of the tax.