Taxing Orlen windfall profits risks straining ties with Warsaw, minister says

Lithuania’s finance minister has questioned the feasibility of imposing a windfall profits tax on Orlen Lietuva, the country’s oil refinery owned by Poland’s Orlen, saying the measure could strain bilateral relations while generating limited revenue for the state.

Finance Minister Taurimas Valys said Thursday that the government had examined the proposal but identified significant risks and little potential financial benefit.

“There are a number of risks related to international relations. We also received an informal opinion from the Ministry of Foreign Affairs that it would not be inclined to support the measure due to certain risks to bilateral relations, so we have analysed the issue in detail,” Valys said.

“The risks are high, while the potential impact is small – ranging from zero to 46 million euros – and our situation is fundamentally different from Poland’s,” he added.

Liberal lawmaker Simonas Gentvilas noted that Poland had already introduced a similar tax.

Prime Minister Mindaugas Sinkevičius said discussions on a potential windfall tax in Lithuania remained at an early stage, with no political consensus reached. Preliminary estimates of the possible revenue range from zero to tens of millions of euros, he said.

Sinkevičius said the government must consider Orlen Lietuva’s importance as a major employer, as well as the implications for international relations and ties with neighbouring countries. No concrete political decisions have been made, but possible measures are being assessed.

Poland has introduced a 60% tax on fuel companies’ profits exceeding a threshold based on standard profit margins. The government expects the measure to raise about 4 billion zlotys (940 million euros) to help finance reductions in fuel prices.

Ramūnas Dilba, an aide to Lithuania’s president, said last week that taxing Orlen Lietuva’s windfall profits could be one way to mitigate the impact of rising fuel prices.

He compared the proposal with a similar windfall tax – dubbed “solidarity contribution” –imposed by the previous government on large commercial banks’ profits. Although such a tax would not directly lower fuel prices, the additional budget revenue could be used to cushion the impact of higher fuel costs, he said.

Former Finance Minister Kristupas Vaitiekūnas had pledged to initiate a temporary tax on fuel wholesalers, saying that taxing Orlen Lietuva’s windfall profits would be more complicated than imposing a levy on commercial banks.

In April, then-Energy Minister Žygimantas Vaičiūnas said Lithuania could introduce such a tax if Poland did the same. He said the decision would need to be coordinated with Poland to avoid market distortions and potential fuel shortages, given that Poland’s Orlen owns the Mažeikiai refinery.