Lithuania's parliament on Thursday voted to raise taxes in order to increase defence spending next year to three percent of gross domestic product, amid security concerns over neighbouring Russia.
The NATO and EU member, which was once ruled by the Soviet Union, has been a key ally to Ukraine since Russia's invasion and fears that it could be the Kremlin's next target.
The small Baltic state is already one of the biggest spenders in NATO. At 2.75 percent of GDP, its current defence budget is above the Western defence alliance's target of two percent.
Finance Minister Gintare Skaiste said the parliamentary vote was "a clear signal" of the political will to increase defence spending even further.
"This is the best investment in peace," she told reporters.
Lithuania intends to purchase tanks and additional air defence systems, and to host a German brigade, as Berlin plans to complete the stationing of around 5,000 troops by 2027.
To that end, the parliament voted to raise the corporate tax rate and excise duties on alcohol, cigarettes and fuel.
Lawmakers also extended a windfall tax on the banking industry's net interest income until 2025.