Skaiste formally proposed the temporary windfall tax on bank profits on Thursday. The Lithuanian government is aiming to raise an estimated €510 million over a two-year period.

Lithuania's banking sector profits have grown considerably as higher interest rates, hiked to combat inflation, have increased many housing loan payments linked to the rates as well.

Should the Seimas approve, the proceeds from the temporary tax would be used for defense spending, Skaiste confirmed.

Speaking at a press conference, the finance minister highlighted that banks' own policies had no influence on their profits, which have been attributable to exceptional circumstances.

"[These profits] are probably surprising to banks themselves," Reuters reported Skaiste as saying.

Under the Lithuanian government's proposal, a temporary, two-year tax of 60 percent would be imposed on the part of a bank's interest income exceeding more than 50 percent higher than a four-year average.

Dominating Lithuania's banking sector are Swedbank and SEB, both Swedish-owned groups, which together command more than half of the country's banking assets. Swedbank's 2022 profits increased by 64 percent to €148 million; SEB's profits went up 49 percent to total €172 million.

Both SEB and Swedbank would be affected by the planned new tax, Bank of Lithuania Governor Gediminas Simkus confirmed.

According to Skaiste, the proceeds from the measure would be used to improve military mobility, including by improving roads and expanding airports, which would allow NATO reinforcements to reach Lithuania faster. The minister noted that under current economic circumstances, banks in Lithuania stand to earn a combined profit of €1 billion in both 2023 and 2024 — over three times more than in recent years.

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