Lithuanian PM orders assessment of windfall tax on energy companies

Lithuanian Prime Minister Mindaugas Sinkevičius on Wednesday instructed the country's energy, finance and economy ministers to urgently assess the profits of energy companies and prepare proposals for taxing windfall gains. The move could affect state budget revenue as well as energy prices for residents in Lithuania.

According to the prime minister, decisions on taxing windfall profits in the current geopolitical situation must rest on up-to-date data and specific calculations. The government needs to determine which measures would work in Lithuania and what benefits they would bring to residents.

What the ministries will examine

The assessment will cover several parts of the energy sector, including fuel, electricity and heating. The ministries are also to look at how effective possible tax measures would be and how they might influence energy prices and consumers. Their assessments and proposals are due by Monday, 9 November.

The initiative comes as Lithuania weighs whether to tax the profits of energy companies amid sharply rising energy costs.

Orlen and the Mažeikiai refinery

Parliament Speaker Juozas Olekas said on Wednesday that taxing the windfall profits of Orlen Lietuva could bring the state budget additional revenue. The discussion follows an announcement by Polish energy group Orlen that it is considering abandoning a modernisation project at its Mažeikiai refinery, the only oil refinery in the Baltic region.

Orlen Chief Executive Ireneusz Fafara has warned that dropping the project could put the refinery's future at risk. Completing the upgrade, by contrast, could extend the plant's operating life by more than a decade.

Finance Minister Taurimas Valys previously expressed doubts about taxing Orlen Lietuva's windfall profits, cautioning that it could strain relations between Lithuania and Poland while yielding very little tax revenue.