Government watch. Comments on the proposal to increase taxes on oil and gas resources

The Lithuanian Free Market Institute has submitted a policy paper on the proposal to increase taxes on oil and gas resources

Proposals to increase the taxes on oil and gas resources are being considered without any evaluation of the impact of previous changes. Before approving these new taxes it should be taken into account that oil production in Lithuania is naturally decreasing and tax revenues will decline even without higher tariffs. In addition, higher taxes will reduce incentives for economic activity and can potentially reduce production as the marginal fields become no longer be profitable.

It is important to note that oil and gas taxes cannot be used to prohibit unconventional hydrocarbon production. If there is a political will to limit this activity, this should be declared by an open ban rather than by means of high taxes.