Lithuania’s tax system ranked eighth among 32 European countries in 2024, according to a recent assessment by the Tax Foundation, a Washington-based tax policy research center. The ranking, published on March 19th by Verslo Žinios, places Lithuania behind Estonia, which secured the top position, and Latvia, which came in fourth. Italy received the lowest evaluation.
The Tax Foundation’s index measures the competitiveness and neutrality of tax systems, asserting that a well-structured system is clear, easily adaptable for taxpayers, and capable of fostering economic development even as generating sufficient revenue for government priorities. According to the organization, the structure of a country’s tax code is a key determinant of its economic performance.
While the Lithuanian result is considered positive, experts emphasize the need for continued improvement. Eglė Stonkutė, an economist at the Lithuanian Confederation of Industrialists (LPK), noted that the Tax Foundation’s methodology prioritizes low marginal tax rates. “In today’s globalized world, capital is highly mobile. Companies can choose to invest in any country, seeking the highest return on investment. If a country’s tax rate is too high, it encourages capital flight to other states and slows economic growth,” Stonkutė stated, according to a LinkedIn post from the LPK.
The 2025 International Tax Competitiveness Index from the Tax Foundation, as reported by the LPK, shows Lithuania maintaining its fifth-place position. Stonkutė questioned whether Lithuania’s relative standing improved or if the rankings of its competitors simply declined. She pointed out that Estonia’s tax system, despite recent increases in profit and income tax rates – from 20% to 22% – remains competitive due to its continued exemption of reinvested profits from taxation.
The Tax Foundation’s 2024 International Tax Competitiveness Index, released earlier, highlights a global trend of declining marginal tax rates on corporate and individual income over recent decades. The index notes that many OECD nations now rely heavily on broad-based taxes like payroll taxes and value-added taxes (VAT). However, the report likewise cautions that not all recent tax policy changes have been beneficial, citing examples of countries increasing corporate income tax rates or making their tax bases less competitive.
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