Billions just fly by – We show you how much extra profit is taken from the energy companies!

Billions just fly by – We show you how much extra profit is taken from the energy companies!
Billions just fly by – We show you how much extra profit is taken from the energy companies!

EU-level agreement

At the Energy Council meeting on September 30, a decree was adopted according to which the extra profit tax was approved at the EU level for non-fossil-based power producers and oil and gas companies. Due to the steeply rising gas, oil and electricity prices, the energy companies really made and are making huge extra profits on the continent.

In order to curb the release of energy prices, the 27 EU member states, in addition to establishing a ceiling on the market revenues of electricity production from inframarginal technologies and reducing the demand for electricity, therefore reached an agreement on solidarity contribution at the end of September, according to which part of the unexpectedly large profits resulting from soaring energy prices must be channeled to other players in the economy and to society in order to ease the burden. Therefore, the proposal “establishes a temporary solidarity contribution measure based on excess taxable profits in the financial year 2022 from companies operating exclusively in the petroleum, natural gas, coal and refining sectors and permanent establishments, proportionate and appropriate to the current socio-economic situation.”

This specifically means that

for 2019-2021. to the part exceeding 20 percent of the average profit achieved in the three business years between

applies to the solidarity contribution, according to the European Commission’s estimate, this measure will be implemented in 2022 up to 140 billion euros can also mean

Many countries on the continent have already introduced or are planning to introduce various solidarity contributions in the current situation, in Hungary, for example, in the form of the extra profit tax imposed on Mol, which aims at 40% of the Brent-Ural spread. In the following, we will look at which contributions are already in force in which European countries outside of our country.

Introduced, reported and proposed extra-profit taxes in Europe until the end of September, source: Tax Foundation

Great Britain

In May, the British government imposed a 25 percent tax on the profits of oil and gas companies as a temporary measure, saying at the time that this special tax would be abolished as soon as the prices of crude oil and natural gas return to levels “considered more normal in historical comparison”. The then Minister of Finance emphasized: in order that this special tax does not come at the expense of investments, companies receive a 90 percent tax discount for every pound they spend on investments. The British Chancellor of the Exchequer stated that, according to the government’s estimates, these tax measures will result in a budget revenue of £5 billion over the next year.

Last week, however, in order to reduce the deficit, in addition to freezing several government investments and eliminating some tax benefits for the public

the British government decided on a significant increase in corporate tax burdens,

Chancellor of the Exchequer Jeremy Hunt has extended the obligation to contribute to electricity producers, that is and tax burden to 35 percent from January and also postponed the duration of the measure from the previous 2025 to 2028. In addition, Hunt also said that Britain will build a new nuclear power plant to diversify its energy sources. Together, these measures are set to bring £14 billion to the Exchequer next year and more than £55 billion between 2022 and 2028.

Italy

The Italian government led by Mario Draghi has also introduced an extra profit tax, the difference between the profit for the period from October 1, 2021 to April 30, 2022 and the profit for the period from October 1, 2020 to April 30, 2021 25 percent be taken away. The extra tax affects many sectors, namely companies involved in the trading, production, distribution and sale of electricity, methane gas, natural gas and petroleum products, the burden does not apply to companies organizing and managing platforms for trading electricity, gas, environmental protection certificates and fuels.

He waited in the summer from ten billion euros by the end of August, only one billion had arrived in the state coffers, and in addition, nearly twenty large companies, after paying the first installment, appealed to the court against the extra-profit payment they considered unconstitutional, among them the largest Italian energy providers. The government responded with stricter measures, according to which those who exceed the next payment deadline can be fined up to sixty percent of the amount to be paid.

Greece

In Greece, a solidarity contribution will be collected after the extra profit achieved in the period between October 2021 and March 2022, the government decided on this in mid-May; according to the country’s energy regulatory authority, the RAE, this profit can be estimated at more than 900 million euros, the state-owned electricity provider, PPC, had already waived 336 million euros by the beginning of the summer in order to help consumers. The difference between the profit generated in a given month and the profit of the same month of the previous year 90 percent of it withdrawn in Greece.

Since last September, Greece has spent more than 9 billion euros on energy subsidies and other measures to help residents and businesses pay their utility bills.

Spain

In July, Spain’s left-wing governing coalition submitted a bill to parliament to introduce a temporary tax on banks and big energy companies, aimed at raising seven billion euros in 2023 and 2024 to ease the cost of living.

While the tax a debits banks’ net interest income and net commission by 4.8%, until then, it is the tax on energy companies a 1.2% tax imposed on the sales of electricity suppliers included. The government has since announced that it is open to amending the bill so that it does not affect the country’s financial stability and is in line with European proposals. The special tax has since been challenged by the Cepsa oil and gas group, which is partly owned by the sovereign fund of the United Arab Emirates. According to company manager Maarten Wetselaar, the tax in its current form will affect Cepsa’s investment opportunities at a time when Spain and Europe need to spend more on energy. to combat climate change and ensure supply. Wetselaar is not the first economic leader to criticize the contribution: the chief executive of energy company Iberdrola, Jose Ignacio Sanchez Galan, has also threatened to take the government to court over the tax, as has Italy’s Enel, owner of Endesa in Spain.

Romania

Romania already decided last May to introduce an extra profit tax, with the exception of fossil fuel power plants, domestic electricity producers 80 percent special tax are paid for revenues above the average selling price of EUR 91 per megawatt-hour.

Subsequently, on September 1 this year, the Romanian government adopted the amendments to the emergency decree on the measures applicable to final consumers in the period between April 1, 2022 and March 31, 2023, in relation to the electricity and natural gas market, and published them in the country’s official gazette on the same day. This legislation retroactively taxes all market participants for deliveries due in the period up to March 2023 with a 98 percent tax payable on the difference between the purchase value and the current value (average price) of the contracts, regardless of when those deals were concluded, as well as the export price and the one-day market price. 100% tax payable on the price difference was also announced. If the tax is not paid by the actors, the penalty is a ban from further trading.

So the tax form

it has retroactive effect and applies to all market participants, not just producers, and actually taxes all trades, even if the parties have already agreed on them and concluded a contract.

According to Janez Kopač, the former director of the Secretariat of the Energy Community, the Romanian measure violates EU rights and could cause a dangerous domino effect on the EU electricity market.

What could be the problem with this?

In the framework of the REPowerEU plan, two important goals of the EU are to end Russia’s dependence on fossil fuels and at the same time to accelerate the spread of renewable energy sources; this is believed to be a workable way to counter Russian aggression secure the EU’s energy supply while maintaining a commitment to combating climate change.

But as the well-known economic cliché says: if you want less of something, tax it. In the case of the EU, the extra profit tax can result in this for two reasons, believes the expert of the Tax Foundation, the leading independent tax policy nonprofit organization in the United States. First, the tax leads to less domestic energy production in the short term, when Europe needs more domestic energy, which makes it more difficult to become independent from Russian energy sources. All of this is because, while high energy prices due to strong demand and scarce supply act as an incentive to increase production, special taxes hold back production because they almost “drive a wedge” between the price paid by the consumer and the price received by the supplier.

Second, the tax cuts for European energy companies the amount of capital available for investment in future projects, as the company manager of the Spanish Cepsa drew attention to. In the medium term, this may make it even more difficult to ensure European energy supply, and the situation is made worse by the fact that the introduction of mandatory contributions increases oil imports, as the mechanism discriminates against domestic oil producers in favor of foreign producers. This only increases the pressure on European leaders to look abroad for alternative energy sources.

If European leaders are looking for a historical example, the United States already tried the extra-profit tax during the Carter administration in the 1980s, when a 70 percent excise tax was imposed on the value of oil sales above $12.81, analyst Sean Bray recalls. . A 2006 study by the Congressional Research Service found that the tax reduced domestic oil production by 1.2-8 percent and increased reliance on foreign oil by 3-13 percent Between 1980 and 1988, when the tax was finally repealed. Although EU policymaking is different from the US version of the 1980s, according to Bray there is no economically explainable reason for decision makers to expect a different result.

According to the analyst, the question is therefore not whether the impact will be negative, but how negative it will be.

Cover image: Getty Images


The article is in Hungarian

Tags: Billions fly show extra profit energy companies

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