A new reform of the Lithuanian real estate taxation system is expected on July 1, 2005. It will bring about higher taxes for capital and tax cuts for workforce, said Finance Minister Algirdas Butkevicius during a Friday news conference.

Butkevicius said that his ministry would work out a tax bill which the Seimas and government would propose.

The finance minister made it clear that the tax reform, an issue which has been under discussion for a while, is indispensable.

"Based on the current taxation base and effective tax laws, we have calculated the existing deficit. Unless we change anything... the result is a budget deficit of 1.4 billion litas (405 million euros)", Butkevicius said.

Lithuania is poised to keep the deficit of about 2.5 percent with respect to the gross domestic product in 2005 and 2006. The newly developed Convergence Program, which the country must implement to qualify as potential member of the euro zone, indicates that the budget deficit will be reduced to 1.8 percent of GDP in 2007.

"I want to have the tariff of the personal income tax reduced to 30 percent in 2006", Butkevicius told reporters. The present tariff of this tax is 33 percent.

About the taxation of real estate, Butkevicius pacified the residents saying that the people who own one house or apartment will not pay this tax.

He added that no increase of the profit tax is on agenda, either. The excise tax for fuel will grow only in 2006.