Ministry of Finance: a one-year extension of the bank solidarity contribution will make an input to everyone’s security
At today's meeting, the Government approved the draft amendment to the Law on Temporary Solidarity Contribution prepared by the Ministry of Finance and the Bank of Lithuania, which extends the payment of the solidarity contribution for the 2025 payment period.
“The extension of the temporary solidarity contribution is of particular national importance in ensuring Lithuania’s national security interests, as russia’s ongoing war against Ukraine has a significant negative impact on our country and the need to take necessary and urgent measures to strengthen defence has increased significantly in recent years. Therefore, we will ask the Seimas to consider the draft law under urgent procedure,” Minister of Finance Gintarė Skaistė says.
The need for a temporary solidarity contribution arose from temporarily significant increases in bank profits, which were mainly driven by economic and geopolitical factors over the last two years and the response to them. The Law shall apply only to the unexpected part of the interest income of credit institutions which is not attributable to business decisions.
Following russia's unprovoked war in Ukraine and rising inflation, the European Central Bank (ECB) has significantly raised key interest rates, with historically the largest excess of liquidity held by banks mainly on the ECB accounts. The ECB pays interest on these funds to commercial banks.
Due to the large and unusual excess of liquid assets in this case, this revenue is independent of the business decisions taken by the banks and is therefore considered unexpected.
Banks have paid a solidarity tax of around EUR 240 million for 2023 and it is forecasted that financial institutions will transfer a similar amount for 2024. The extension of the temporary solidarity contribution for 2025 and the application of the 2019-2022 comparative period for the calculation of the temporary solidarity contribution base will result in an additional EUR 50-60 million.
The Bank of Lithuania published that, according to unaudited data, banks earned EUR 986 million in profits in 2023 (after the solidarity contribution and other taxes), twice as much as in 2022 (EUR 491 million).
russia's war in Ukraine has further highlighted military mobility needs in Lithuania, which amount to about EUR 1 billion.
The development and renovation of airports and seaports necessary for military transport, the construction of logistic and loading yards, the development of roads of national importance near the Rūdninkai polygon, the reconstruction of the highway at the Polish border, the renovation of bridges and viaducts, the construction of ramps and the implementation of other necessary projects are financed and are further planned to be financed from the temporary solidarity contribution.
Last updated: 05-06-2024
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