STT flags corruption risks in Vilnius tax relief scheme

Lithuania’s Special Investigation Service has identified corruption risks in the system used by Vilnius municipality to compile a list of cultural institutions and sports clubs eligible to receive support, LRT reported.

Under rules approved by the Vilnius City Council in December 2022, people who support sports clubs or cultural institutions representing the capital may receive partial exemptions from annual real estate, land and state land lease taxes. The exemption can cover up to 70 percent of the amount provided as support.

Support may be given only to sports and cultural organisations included on a list approved by the mayor of Vilnius. However, only organisations that have taken part in municipal selection processes for high-performance sports or cultural funding and were found to meet the funding requirements can be included.

This applies regardless of whether the organisations ultimately receive municipal funding.

Participation in a funding competition is therefore not only a condition for receiving municipal funding but also a prerequisite for being included on the list of organisations whose supporters can qualify for tax relief, the Special Investigation Service said in an anti-corruption assessment.

The service concluded that the current legal regulation is flawed from an anti-corruption perspective.

According to the service, at least 135 people and organisations that provided support received tax relief worth 2.4 million euros last year.

Vilnius municipality told ELTA that representative sports clubs received 1.3 million euros in support in 2023, while cultural institutions received 171,600 euros. Tax relief granted to supporters that year totalled 964,900 euros, including 914,500 euros in real estate tax, 2,000 euros in land tax and 48,300 euros in state land lease tax.

In 2024, sports clubs received 2.3 million euros in support and cultural institutions received 420,900 euros. Tax relief totalled 1.7 million euros, including 1.6 million euros in real estate tax, 10,200 euros in land tax and 89,600 euros in state land lease tax.

The Special Investigation Service said publicly available data showed that tax relief was widely used in the municipality and that many people and organisations applied for it.

Service warns of unequal conditions

The current system does not allow organisations that might meet the requirements for representative sports clubs or cultural institutions to be included on the support recipients list if they have not submitted funding applications to the municipality.

The service said this could create preferential conditions for organisations that take part in the capital’s municipal funding competitions and result in unequal treatment.

The current regulation may reduce transparency because organisations that have not applied for funding have no alternative way to prove that they meet the criteria for inclusion on the list, the service said.

According to the assessment, inclusion depends on whether organisations that submitted funding applications were found to meet funding requirements, rather than on independently verifiable criteria equally accessible to all potential applicants.

The service said sponsors seeking tax relief could currently provide funding only to a limited, preselected group of institutions, even though other organisations could also be considered important to Vilnius.