The government size in Lithuania is moderate by European standards, with the level of government expenditures, that stood at 33.5% of the GDP, having been among the lowest. Such a low level of government spending is a result of moderate taxes and efficient governance coupled with low transfers and subsidies. Lithuanian tax system can be depicted as flat, with some minor progressive characteristics – personal income tax is set at 15%, the same rate as the corporate income tax. Standard VAT rate is 21% with reduced rates of 9% or 5% for certain products. Excise duties on tobacco, alcohol and energy are among the lowest in the EU. Tax wedge on labour is high, approximately 35.5%, because of the high rates of social contributions. The strong recession of 2009 had major repercussions on
the revenue side of the government finance, which had to launch major austerity measures. They lowered the public expenditures by 10 percentage points. This has almost eliminated budget deficits which, coupled with post-recession growth rates, has stopped public debt growth. However, public debt is 2.5 times higher than before the recession. The Lithuanian state is not present in the market, except a few public companies mostly in the utilities sector.