2026-02-26
Having assessed the draft resolution of the Government of the Republic of Lithuania proposing to increase the permissible cash payment limit to EUR 10,000, the National Audit Office notes that such a decision raises doubts as to its compatibility with the state policy of reducing the shadow economy, ensuring the transparency of transactions, and strengthening data-based tax administration.
International organizations emphasize that Lithuania is still losing a lot of VAT revenue. In 2023, the shortfall amounted to 15.1%, which is significantly higher than the European Union average of 10%. Reducing the use of cash payments is one of the measures to narrow this gap.
"When deciding whether to raise the cash payment limit, it is important to assess how this will affect transparency, tax collection, and the fight against the shadow economy. At present, the proposal to increase the limit is not based on comprehensive data and may weaken the control measures already in place. State policy should strengthen the traceability of transactions and the stability of public finances, rather than increase risks," stresses Auditor General Irena Segalovičienė.
In 2024, cash accounted for about 60% of all payments in Lithuania, which is the highest share in the euro area. Last year, the Organization for Economic Cooperation and Development (OECD) noted that limiting cash payments to EUR 5,000 was the right move. However, it is still important for Lithuania to reduce the use of cash and promote digital payments, as they are easier to track and thus reduce tax evasion. The OECD also recommended conducting an assessment of the impact of the restrictions on cash transactions, which could provide useful insights into how to reduce VAT evasion.
Key observations of the National Audit Office
1. Incompatibility with policies to reduce the shadow economy
The state is consistently strengthening data-based tax administration and combating the shadow economy. A higher cash payment limit would increase the share of high-value transactions that are not recorded in real-time data systems, thereby undermining the goal of increasing transaction transparency.
2. Increased risk to transaction traceability and control effectiveness
Cash transactions carry a higher risk of substantiation and justification than non-cash transactions. Raising the limit would create conditions for transactions of significant value to take place in less traceable forms, increasing the need for ex post controls and the administrative burden on supervisory and control authorities.
3. Insufficient impact assessment
The draft does not provide a detailed, data-based analysis justifying the need to increase the proposed limit. The possible impact on the risk of the shadow economy, the traceability of transactions, the efficiency of tax administration, and the costs of public sector control has not been assessed.
4. Lack of systemic consistency
Restrictions on cash payments are one of the structural measures for increasing transparency. When changing such measures, it is necessary to assess their place in the overall risk management and data-based control system. Without clear justification, the proposed decision may weaken established prevention principles.
In the opinion of the Auditor General, it is necessary to strengthen public awareness and reduce the possible misconception that the possession of cash itself is currently restricted. "I would like to emphasize that the current regulations do not in any way restrict the amount of savings or cash that people keep in their 'socks' or safes. The restrictions only apply to payments – transactions in which property changes hands. This ambiguity allows unfounded fears to flourish," emphasizes Irena Segalovičienė.
The National Audit Office notes that the proposal to increase the limit on cash payments is not in line with the observations of the supreme audit institution aimed at reducing the shadow economy. Such a proposal is not based on an impact analysis. The impact on the shadow economy, transaction control, and state revenues and expenditures has not been assessed. Such decisions should only be made after a thorough assessment.