Lithuania’s governing coalition finalized a new tax strategy on Wednesday, targeting windfall profits in the energy sector and accelerating excise hikes on tobacco and alcohol to bolster the 2027 national budget.
Prime Minister Mindaugas Sinkevičius confirmed the move following a coalition council meeting, projecting the measures could generate tens of millions of euros in additional state revenue.
Targeting Energy Sector Windfalls
The government intends to implement a windfall tax scheme specifically for companies operating in the fuel production sector, a move that would primarily impact Orlen Lietuva, the operator of the only oil refinery in the Baltic states. Prime Minister Sinkevičius estimated that this tax alone could add up to 70 million euros to the budget, with the remaining 20 million euros expected from increased excise duties on alcohol and tobacco, 15min.lt reported.
A windfall tax is defined as an additional levy on companies earning more than usual. While the government aims to capture these gains, it remains unclear how much funding could be generated, as data on specific corporate profits is currently lacking and a final tax rate has not been set.
Orlen officials have previously warned that such a tax could jeopardize planned modernization projects at the Mažeikiai refinery. While Finance Minister Taurimas Valys suggested these warnings could be interpreted as corporate pressure, other officials, including Foreign Minister Kęstutis Budrys, have urged caution to ensure that potential financial gains do not result in broader negative political consequences for Lithuania.
According to tv3.lt, some analysts estimate that the refinery could earn roughly 350 million euros in profit this year, and applying a tax similar to Poland’s could yield tens of millions in revenue.
Government Seeks to Reduce Deficit to Meet EU Criteria
The latest tax adjustments come as the government grapples with a projected general government deficit of 3.8 percent of GDP, exceeding the 3 percent limit set by the EU’s Maastricht criteria. Prime Minister Sinkevičius emphasized that restoring fiscal discipline is a long-term challenge that will likely require at least five years of sustained effort.
“The long-term goal is to return to the framework of fiscal discipline; it will take time to do that, by different estimates it could be a five-year or longer plan, but we will be forced to do that and it will need to be done,” Sinkevičius told reporters after the meeting, as noted by 15min.lt.
The government plans to continue discussions next week to refine these proposals before the budget is formally adopted.
Coalition Disagreements on Excise and Exemptions
While the coalition has reached a baseline agreement on several measures, including higher taxes on gambling and a sugar tax, internal friction remains regarding the broader tax policy. Virginijus Sinkevičius, leader of the Democratic Union “Vardan Lietuvos,” argued that while the windfall tax is a step in the right direction, the government should simultaneously review planned fuel excise increases, noting that fuel prices have remained largely stagnant.
“We remain with our proposal that tax policy should be reviewed alongside this, as fuel prices are essentially unchanged,” Virginijus Sinkevičius told journalists. Conversely, other coalition partners, including the Lithuanian Farmers and Greens Union (LVŽS), have firmly opposed the removal of existing tax exemptions.
“It is certainly not being considered to review the drug exemption, it is certainly not being considered to review the periodicals exemption. All of this remains,” said LVŽS chairwoman Aušrinė Norkienė.
Lithuania Lags Behind Poland's Response to Energy Crisis
Virginijus Sinkevičius pointed out that Poland has already implemented a windfall tax on oil refineries with a 60 percent tariff, suggesting that Lithuania is lagging in its response to the energy crisis.
According to LRT.lt, Poland was also among the nations that advocated for a unified European solution to windfall taxation, though such a bloc-wide agreement has yet to materialize. Former Finance Minister Gintarė Skaistė criticized the current approach, stating, “In this situation, it seems that the Poles care more about their market than Lithuania does.”
The project also includes specific excise rates for beverage concentrates, with a tariff of 105 euros per hectoliter for liquid concentrates and 2 euros per kilogram for other types, set to take effect on July 1, 2027.
Meanwhile, presidential advisor Vaidas Augustinavičius said that the government has yet to present a complete cost-benefit analysis regarding the windfall tax. As discussions continue, lawmakers are debating the exact mechanism for the tax and its potential impact on the national budget.
