Lithuania's government will not cut value-added tax on fuel even if oil prices continue to rise, Prime Minister Mindaugas Sinkevičius said on Friday.
This distances Vilnius from a move by neighbouring Poland, which this week temporarily reduced VAT on some fuels from 23% to 8%, a cut estimated to lower pump prices by up to €0.23 per litre depending on fuel type. The measure is expected to cost the Polish state budget around €115 million.
"We are not discussing VAT," Sinkevičius said. "It would likely be difficult for us, as a country, to compare ourselves with the Polish economy. Poland's economy is nearly 11 times larger, giving their government slightly more room for manoeuvre than smaller Lithuania."
Instead, Lithuania has prepared a contingency plan centred on excise duty reductions. The prime minister has previously indicated that such measures would be considered if diesel prices exceeded €2.20 per litre.
In mid-April, following an escalation of conflict in the Middle East, the government cut the diesel excise duty by six cents per litre for a two-month period.
Sinkevičius said a similar excise-based response remained on the table if the situation in the Middle East were to worsen and push oil or petroleum product prices sharply higher.
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