Lithuania weighs a windfall tax on energy companies: ministries have until 9 November

Lithuanian Prime Minister Mindaugas Sinkevičius on Wednesday, 4 November, instructed the ministers of energy, finance, and economy and innovation to urgently assess energy companies' profits and windfall profits and to prepare proposals for taxing them, the BNS news agency, LRT and Verslo žinios reported. "In the current geopolitical situation, decisions on taxing energy companies' windfall profits must be based on up-to-date data and concrete calculations. We must assess which measures would be effective in Lithuania and what benefit they would bring to residents," the prime minister said.

What was decided. The assignment covers the fuel, electricity and heat markets. The ministries will examine how effective a possible tax would be and what effect it would have on energy prices and on residents. The assessments and proposals must be submitted by Monday, 9 November.

Context. The debate intensified after Polish group Orlen said it was considering abandoning the modernisation of the Mažeikiai refinery, the only one in the Baltic states; chief executive Ireneusz Fafara warned that without the project there would be a risk of closure. The modernisation contract signed in 2021 was worth €641 million, and in 2023 the estimated cost rose to about €970 million, according to LRT. Orlen Lietuva is Lithuania's largest taxpayer and employs more than 1,500 people. Seimas Speaker Juozas Olekas said taxing Orlen Lietuva's windfall profits could bring extra budget revenue and that the levy could be lower than in Poland.

Positions in government. Finance Minister Taurimas Valys said Orlen's announcement could be interpreted as pressure linked to the tax under discussion and warned that additional taxation of Orlen Lietuva would harm relations with Poland; an EU-level decision would make the step easier for Lithuania, he added. Energy Minister Lukas Savickas said he expects Orlen Lietuva to complete the modernisation, 80% of which has already been invested. Poland recently introduced a windfall tax on energy companies, from which it expects about 4 billion zlotys, roughly €940 million, BNS notes.

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