Government suggests keeping 9 pct VAT on heating

Lithuania's government decided to keep the reduced 9-percent tariff of the value-added tax (VAT) on centralized heating and give up the plans of introducing a new tariff of 15 percent.

The plans are envisaged in the budget draft prepared by the government, Virginijus Sinkevicius, chairman of the parliamentary Economic Affairs Committee, confirmed to BNS on Tuesday.

"The reduced VAT rate will be at the level that the budget can handle. This time the budget calculations suggest that it can handle the 9 percent, therefore, the 9 percent and 5 percent tariffs are left unchanged," Sinkevicius said.

The 2018 budget draft prepared by the Finance Ministry envisages a 9-percent VAT tariff on centralized heating, accommodation and passenger transportation services and books. A 5-percent VAT tariff is planned for medication and equipment for the handicapped.

The government earlier planned to discard the 9-percent VAT tariff on heating in 2018 and introduce a new tariff of 15 percent, which would be applied for centralized heating and accommodation services.

This year, Lithuania's ruling parties have repeatedly changed their stance on a reduced tariff on heating.

Critics of the reduced VAT tariff say it is not socially fair, as it can be taken advantage of by wealthy people, while those not connected to the centralized heating system cannot benefit from the reduced rate, regardless of their household income.

Meanwhile, supporters say the state should take responsibility for the high costs and inefficiency of heating supply to apartment blocks rather than shift the burden on consumers. In their words, elimination of the reduced rate would make hundreds of thousands of people eligible for social benefits, which would become a bureaucratic burden for municipalities and a moral damage to apartment block residents turned into recipients of social benefits.

The next year's budget draft should be published later on Wednesday.

Source: BNS
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