A sector characterized by inertia: how to look at the numbers
in 2023 companies working in the construction sector in Lithuania paid as much as 48 percent. more taxes than in previous years. The most taxes in 2023 was paid by “Kaunos tiltai”, in second place was one of the largest Lithuanian road construction companies “Fegda”, in third place was the Dutch company “Van Oord Dredging and Marine Contractors BV”, which carried out dredging works in the port of Klaipėda. However, we can hardly expect similar growth trends in the next year as well – the volume of taxes paid was mostly increased by large projects completed and accounted for last year, which are not foreseen in the near future.
Vilius Tamkvaitis, senior economic and political analyst of “Investuotoi Forum” notes that the construction sector is very inert, therefore, when the sector slows down, the indicators may remain positive for some time, and on the contrary, when the prospects improve, they may remain negative for some time.
“According to the data provided by VMI, the construction sector paid 193 million euros in taxes in 2023. Compared to 2022, the amount of taxes paid by the sector increased by as much as 48%. However, if you look at the data in more detail, the situation in the construction sector is not so optimistic. If we compare the results of consistently and stably operating construction companies in Lithuania, after assessing the consistency of the activity, the amount of taxes paid decreased by about 15%. In other words, the amount of taxes paid was significantly increased by various projects that were completed or accounted for in 2023,” he calculates.
in 2023 the largest payer in the construction sector was the joint-stock company Kauno tiltai, which in 2022 did not enter the lists of the largest taxpayers. The third largest taxpayer is the Dutch company “Van Oord Dredging and Marine Contractors BV”, that is, the company that carried out dredging works in the port of Klaipėda.
“Among the largest tax payers there are also a number of companies that completed large projects last year, and the significant taxes paid by these companies are unlikely to be repeated in the future,” thinks V. Tamkvaitis.
According to the “Investuotoi Forum” analyst, we can best predict the prospects of the construction sector by assessing the area of building permits issued: “Compared to 2022, the area of buildings planned to be built decreased by 13%.” The biggest slowdown can be seen in the residential real estate sector, where the area of issued permits decreased by as much as 32%. The builders who completed the old projects still had work for some time, but in the near future the volume of work may decrease significantly, so the results are likely to be pleasing in 2023. is the last chance to prepare before the inevitable contraction of the sector in the next couple of years”.
According to V. Tamkvaitis, the slowdown of the construction sector should not become critical for the Lithuanian economy.
“The construction sector creates about 8% of Lithuania’s gross domestic product. And the share of taxes paid is slightly more than 3% of all taxes paid by legal entities”, he analysed.
The construction sector in Lithuania is often still considered to be one in which there is a lot of “shadow”, but it is difficult to estimate specific numbers here.
“Tax discipline in the construction sector is difficult to assess. Part of the sector is not reflected in statistical information in any form. I would be surprised if it turns out that big companies are hiding income or salaries. At the same time, it is difficult to estimate how many ditches are dug and walls painted after a verbal agreement and paying for the work in cash”, comments V. Tamkvaitis.
The higher taxes of “Kaunas tilta” were determined by the volume of work and salaries
The most taxes in 2023 The company that paid Kauno tiltai is one of the largest construction companies in the Baltic States.
“Thus, we are also one of the largest employers in Lithuania. The fact that we paid the most taxes last year was due to several circumstances. Firstly, with the increase in turnover, the amount of taxes paid to the national budget also increased proportionally. Second, by raising wages, we also got rid of more taxes. AB “Kauno tiltai” has never applied and does not apply “black” billing practices. Showing respect to the employee, the shareholder, and the state, we fulfill all tax obligations without exception in accordance with the law. Due to the portfolio of ongoing or won projects and the increased funding of the Road Maintenance and Development Program (KPPP), we expect to maintain our leading position in 2024. Most likely, the number of employees will increase, and the share of taxes paid to the state budget will remain significant”, hopes the company’s CEO Aldas Rusevičius.
When asked about the emerging challenges, he did not hide that there is no shortage of them.
“Of course, we face certain challenges. There is a shortage of qualified workers, and the country’s migration policy is not helping either. Constantly changing, tightening migration procedures or long-lasting paperwork really hinder attracting labor from outside. Paradoxically, Lithuanians, who do not strive to work in our sector, do not support more employment of foreign citizens. Another aspect is the escalation of inadequate wage increases in the public space, in the media, and in the speeches of politicians. Although it is announced that wages will rise, no real assumptions are made for this. When participating in work tenders, when calculating the value of the project, the salary is a significant component of the formula. However, with rising salaries, we cannot increase the prices of works proportionally”, he comments.
“We can also see happy trends – the more generous financing of KPPP has allowed the implementation of large projects in Lithuania to start, for example, to return to the repair of main roads. The accelerating construction of “Rail Baltica” allows us to hope that the mentioned project will be implemented on a larger scale as well”, says A. Rusevičius.
Tags: Companies paying taxes Lithuania unprecedented jump construction sector
