Minister of Finance: reduced VAT gap to 10% would generate EUR 196 million in additional revenue in 2026
Minister of Finance Taurimas Valys presented to the President of the Republic shadow economy and VAT gap reduction activities, as well as foreseen measures to reduce the VAT gap in Lithuania to no more than 10% in 2026–2027, and to 9% in 2028.
“Every euro returned to the budget increases capabilities of the State, not only in terms of higher pensions and support for young families. This means more opportunities for our defence and security”, the Minister underlined.
According to the European Commission, in 2024 the VAT gap in Lithuania was 13.2%, where the latest calculated EU average in 2023 is 9.5%.
According to the latest CASE data, reduced VAT gap down to 10% could result in additional VAT revenue of approximately EUR 196 million in 2026, assuming that one percentage point of the VAT gap makes up approximately EUR 70 million.
According to the Minister, shadow economy and VAT gap reduction is oriented towards three key areas, i.e. prevention of tax irregularities, promotion of voluntary tax payment and closer inter-institutional and international cooperation.
“The essence of all these areas is the same – to see risks better, to react to them faster, and at the same time to make it as easy as possible for those who pay their taxes fairly”, the Minister emphasised.
More data for identification of risks
The State Tax Inspectorate (STI) and Lithuanian Customs are substantially moving towards a data-driven model of tax administration.
“The STI can already receive, integrate and analyse information from financial market participants, digital platforms, registers and international data exchange. An automated X-ray image analysis is used in the Customs for risk assessment. Also, there is a model integrating 17 different data sources”, Mr T. Valys said.
“The key question is not whether we have necessary technological and data assumptions. We really have a lot. Now, it is especially important to use them to the maximum and turn them into a concrete result for the State budget and a better service for people and business”, the Minister emphasised.
Foreseen measures
It is proposed to give the STI more opportunities to act proactively. If the STI finds that there are inaccuracies in the taxpayer’s return and has sufficient data to do so, it could revise the return itself, without waiting for the taxpayer to do so.
As of 1 July 2030, electronic VAT invoices are expected to be mandatory not only for transactions within the EU, but also for domestic transactions. This would allow more processes to be automated, transactions to be seen more quickly and opportunities to conceal taxable activities to be reduced.
It is proposed to provide additional possibilities also for the Customs to investigate violations of international sanctions and other restrictive measures more effectively. In certain cases, the Customs could limit customs clearance and apply enforcement measures.
“The purpose of these changes is not to reinforce control for the sake of control. The key is to provide necessary tools to institutions that already available data, technologies and analytic possibilities give a maximum result”, the Minister underlined.
According to the Minister, some of the foreseen measures will still be discussed. These include the development of minimum criteria for a reliable taxpayer and cross-cutting measures for malicious evasion of tax obligations. Also, more stringent measures for repeated violations of international sanctions and solutions for better control of the circulation of tobacco and nicotine products are also being considered.
The STI focuses on VAT risks
The STI is currently implementing a plan of measures to improve VAT administration and reduce the VAT gap.
In 2025 and the first half of 2026, the STI performed 12.7 thousand VAT-related controls. They detected undeclared taxes in the amount of approximately EUR 153 million. The largest part of this amount, EUR 105 million, was due to undeclared or incorrectly declared VAT obligation of undeclared sales.
The automated VAT fraud identification system APSIS, used by the State Tax Inspectorate since mid-2025, also contributes to the detection of VAT fraud. 85 control procedures were carried out using this system, where EUR 1.3 million were additionally estimated in taxes.
Last updated: 07-09-2026
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