“Lithuania is committed to pursuing a stable fiscal policy, supporting social welfare and strengthening national defence. This requires additional funds, therefore we must pay special attention to effective revenue collection. As Lithuania’s VAT gap, unfortunately, remains one of the largest in the European Union, this agreement with the IMF marks an important step for Lithuania in addressing this problem. In cooperation with the IMF, we aim to better understand the causes of the VAT gap and apply smart, data-based decisions to reduce it. This means more efficient tax administration and higher revenue to the State budget”, Vice-Minister of Finance J. Kizenevič stated at the signing ceremony, emphasizing that closing the VAT gap is not just a technical task, but a strategic priority that will help ensure Lithuania’s security and resilience.
Under this agreement, the IMF will provide technical assistance to Lithuania in the area of tax collection, conducting expert analysis and preparing detailed recommendations on how Lithuania can increase revenue collection, prevent the shadow economy, with particular attention to reducing the VAT gap and strengthening tax administration. Such IMF assistance has already been successfully used by Poland and other EU countries.
The project will consist of two parts: an analysis of the VAT gap to identify the most important factors and sources influencing its size and providing recommendations on improving VAT administration and reducing the VAT gap, including the development of automated information systems to ensure more efficient tax collection and reduce tax administration costs.
The IMF, together with the State Tax Inspectorate, has already begun expert work. According to the planned work schedule, the first part of the interim analysis and recommendations report should be prepared in the spring of 2026, and the second part in the autumn of 2026.
“We expect that when drafting the 2027 budget, we will be able to rely on the IMF recommendations and successfully implement them, not only by collecting more revenue into the budget, but also by increasing the fairness of the tax system and trust in state institutions”, Vice-Minister of Finance J. Kizenevič said.
