Lithuania's finance minister warns Orlen windfall tax could strain ties with Poland
Lithuanian Finance Minister Taurimas Valys says a windfall profits tax on Orlen Lietuva, the refinery owned by Poland's Orlen, would carry high diplomatic risks for little revenue. The government has not made a decision.
Lithuania's Finance Minister Taurimas Valys on Thursday cast doubt on the idea of taxing the windfall profits of Orlen Lietuva, the country's oil refinery, which is owned by Poland's energy group Orlen. He said the step could strain relations with Warsaw while bringing the state only modest revenue.
Valys said the government had reviewed the proposal and found significant risks. The Ministry of Foreign Affairs also gave an informal opinion that it would be unlikely to back the measure because of the potential damage to bilateral relations. According to the minister, the risks are high and the possible effect is small, ranging from zero to 46 million euros, and Lithuania's situation is fundamentally different from Poland's.
Liberal lawmaker Simonas Gentvilas noted that Poland has already introduced a similar tax. Prime Minister Mindaugas Sinkevičius said discussions in Lithuania are at an early stage and no political consensus exists. Preliminary revenue estimates range from zero to tens of millions of euros. He said the government must also weigh Orlen Lietuva's role as a major employer, as well as the consequences for international relations and ties with neighbouring countries.
Poland's example
Poland has introduced a 60% tax on fuel companies' profits above a threshold based on standard profit margins. Its government expects to raise about 4 billion zlotys (940 million euros) to help fund lower fuel prices.
The presidential adviser's idea
Ramūnas Dilba, an aide to Lithuania's president, said last week that taxing Orlen Lietuva's windfall profits could be one way to soften the impact of rising fuel prices. He compared it with the "solidarity contribution" the previous government imposed on large commercial banks' profits. Although such a tax would not directly cut fuel prices, the extra budget revenue could be used to cushion the effect of higher fuel costs, he said.
Former Finance Minister Kristupas Vaitiekūnas had promised to initiate a temporary tax on fuel wholesalers, saying that taxing Orlen Lietuva's windfall profits would be more complicated than levying banks. In April, then-Energy Minister Žygimantas Vaičiūnas said Lithuania could introduce such a tax if Poland did the same, but that the decision would need to be coordinated with Warsaw to avoid market distortions and possible fuel shortages, since Poland's Orlen owns the Mažeikiai refinery.
