Banks, Financial Services, Legislation, Lithuania, Loan, Taxation

It may be hard to believe but commercial banks last year paid only LTL 11 million (EUR 3.2 million) profit tax for 2011, although they all together earned LTL 1.1 billion (EUR 319 million).

The Seimas' Budget and Finance Committee has already asked tax inspectors to check commercial banks. An interesting scheme is suspected: Lithuania-operating banks borrow money for very high interest from the primary banks, and then pay them interest in order to avoid a profit tax. A trend remains that working residents contribute to the state budget through their income tax more than economic entities through their profit tax. Last year, from around LTL 25.1 billion (EUR 7.27 billion) revenue to the state budget profit tax accounted for around LTL 1.2 billion (EUR 348 million), income tax – LTL 1.46 billion (EUR 423 million). This year, the plan is to collect a total of around LTL 25.7 billion (EUR 7.45 billion): resident income tax – LTL 1.827 billion (EUR 529 million) and profit tax – LTL 1.281 billion (EUR 371 million).

The most interesting fact was discovered by the Seimas' Budget and Finance Committee. For example, last year commercial banks contributed to the state budget through their profit tax by only slightly more than LTL 11 million (EUR 3.2 million). This money was paid for the 2011 activities. While the Bank of Lithuania reports that in 2011 commercial banks earned as many as LTL 1.1 billion (EUR 319 million). Thus, in fact the state received only 1% from the banks, while profit tax accounts for 15%. The most paradoxical thing is that the two biggest Lithuania-operating Scandinavian banks – SEB and Swedbank – last year together paid ... LTL 3,000 (EUR 870) profit tax. Even those Lithuanians earning less than an average wage paid more taxes than the two giant banks.

One of the above-mentioned banks paid LTL 5,000 (EUR 1,500), while the other took back LTL 2,000 (EUR 580) because it had paid an advance. While SEB said that in 2011 it earned LTL 380 million (EUR 110 million), Swedbank – LTL 590 million (EUR 171 million). All the other commercial banks paid cents too except for Nordea which paid LTL 11 million (EUR 3.2 million). The bank said that its profit before taxes and provisions stood at LTL 90.9 million (EUR 26 million) in 2011.