Lithuanian govt proposes EUR 2.5 b to soften energy prices for businesses

VILNIUS – The Lithuanian government is planning to allocate almost 2.5 billion euros to soften energy prices for businesses in the last quarter of this year and the first quarter of next year, Finance Minister Gintare Skaiste said on Friday. 

"Given the situation we have today and to maintain overall competitiveness in the European Union, as other countries are taking certain steps, which is inevitably affecting Lithuanian business as well, we propose an additional package for the last quarter of this year and the first quarter of next year," Skaiste told a news conference after presenting the government's draft budget for 2023.  

"The total impact, including the proposed new measures, amounts to around 2.5 billion euros," she added.

Economy and Innovation Minister Ausrine Armonaite said at the news conference that the government is launching its business aid package immediately.

Starting Friday, it offers a tax holiday for businesses whose energy costs account for at least 10 percent of their total costs.  

"Tax collection will be suspended for half a year and no tax interest will be payable for that period," said Skaiste. 

"During these two quarters, businesses could have access to about 1.2 billion euros in funds to maintain their turnover by obtaining interest-free loans in this way," she added.  

Around 600 million euros are planned to be made available to businesses for installing solar power plants, with funds to be borrowed for this purpose from the Recovery and Resilience Fund (RRF).

"We are planning to develop about 600 megawatts of additional capacity for businesses, with the investment expected to flow in within three years," the finance minister said.  

The government proposes to allocate 446 million euros for covering part of increased electricity prices for businesses from October through March. 

Under the proposed model, half of the electricity price above 24 cents per kilowatt-hour in the last quarter of this year and above 28 cents in the first quarter of next year would be covered from the state budget.

Another 60 million euros will go to cover the revenue loss due to the extension of the reduced 9 percent VAT rate for restaurants and other food-serving businesses, and 6 million euros to keep in place the 9 percent VAT rate for natural and legal persons organizing cultural, recreational and sports events.  

The government is also planning to provide 30 million euros in subsidies for energy-intensive businesses by the end of this year, with the measure to be financed from the 2022 budget.  

Around 1,500 companies will receive subsidies in the form of a refund of part of the taxes paid by them. The subsidies are likely to be linked to part of the personal income tax and corporate tax paid last year, according to Skaiste. 

The initial plan is to set a "ceiling" of 0.5 million euros and a "floor" of 500 euros for such subsidies.  

Some 50 million euros in working capital and investment loans are also available to companies under an aid instrument for businesses affected by the war in Ukraine, Skaiste said, adding that the authorities are also working on a 31-million-euro instrument to allow companies in the agricultural sector to borrow funds. 

The Cabinet is expected to discuss next year's draft budget later on Friday. 

Once endorsed by the government, the bill will go to the parliament for approval.