On the Application of Reduced Value-Added Tax Rates

Comprehensive assessment of economic impact of reduced rates of value added tax (VAT) applied to goods and services had not yet been performed in Lithuania, i.e., there had not been gathered objective and fact-based information which would have allowed to evaluate whether application of the reduced rates of VAT achieved the set objectives and whether they had a long-term impact on the market.
 
The aim of that audit was to evaluate the effectiveness of application of the reduced rate of VAT and the mechanism of evaluation of the impact of the reduced rate of VAT.

In 2005 due to reduced rates of VAT the state budget did not receive revenue amounting to LTL 215 million. The audit detected that the most benefit due to the reduced rate of VAT was received not by the users of goods or services, but by companies providing those goods and services.