Today, European energy ministers agreed on a package of emergency measures to curb the surge in energy prices. The package includes two measures to capture extraordinary profits from energy and fossil fuel companies. This follows the European Commission’s proposal on 14 September.
In response, Chiara Putaturo, Oxfam EU Tax expert, said:
“It is great news that European countries have, for the first time ever, agreed to capture some of the extreme excess profits of companies. But now they need to be far more ambitious. This means taxing all sectors profiteering off the global crises at a higher tax rate of between 50 and 90 percent and go beyond 2022.
“If European countries fail to be ambitious, they will only get the crumbs of the colossal corporate profits. Some European countries are already leading the way like Greece with a rate of 90 percent and Spain which is planning to capture excess profits made by banks. European countries must also design the tax in a way to capture the profits hidden in tax havens.
“In the long-term, work must be done at the global level to implement permanent windfall taxes that capture all excess profits and redistribute the revenues fairly to countries where companies have their real economic activity rather than funnelling them away in tax havens. This is the way to fight inflation and inequality. It is sheer madness that we are living in a world where companies are cashing in on the pain of ordinary people, people who are struggling to put food on the table and heat their homes.”
Oxfam experts are available for interview or comment.
Today, European Energy Ministers agreed on a package of emergency measures to curb the rise in energy prices. This follows the European Commission’s proposal on 14 September. The final package includes:
- A “temporary solidarity contribution” on fossil fuel companies to recoup one-third (33 percent) of excess profits made in 2022 and/or 2023. Excess profit is defined as profit exceeding the average of the last four years (2018 – 2021) by 20 percent. This is a threshold rate and EU countries can apply a higher rate. Revenue will be funnelled to consumers and companies to cushion the impact of high energy bills, and to invest in green energy.
- A price cap on revenue made by non-gas energy companies (wind, solar, nuclear, etc): The cap will be set at 180 euros per megawatt hour and the price difference will be recycled back to consumers and decarbonisation technologies, like renewable energy.
Countries have until 31 December 2022 to implement the measures if they do not already have an equivalent measure in place.
Oxfam recently published a new media briefing, The Case for Windfall Taxes. It includes new data on how much excess profits companies have made and how much revenue a global windfall tax could recoup.
- 1000 of the world’s biggest companies have recorded excess profits of 1.15 trillion dollars in 2020 and 2021 compared to the pre-pandemic period – an increase of 68.5 percent.
- We could raise more than 1000 billion dollars globally with a tax of 90 percent on the windfall profit of 1000 of the world’s biggest companies.
Many European countries have already introduced or are in the process of introducing a windfall tax – for a full list, see the table in Oxfam’s recent media briefing, The Case for Windfall Taxes. Oxfam recommends countries implement their own measures if they are more ambitious than the EU proposal.
Oxfam calls for a windfall tax that:
- is ambitious, sector-wide, and automatic;
- has a rate between 50 – 90 percent (if the tax base is calculated only on excess profit and exceeds 10 percent of the average of the previous years);
- prevents an increase in consumer costs by stopping companies from passing on the costs to consumers;
- redistributes revenues to those most affected by the crisis, both at home and abroad;
- uses a tax base that captures the most excess profit and takes into account the real economic activity of a company in a country. A 2020 analysis showed that some EU countries would capture more excess profit by designing a tax base that takes into account the real economic activity of the company rather than profit.
The IMF recently suggested a permanent coordinated windfall tax (a) targeting economic rents (defined by the IMF as returns in excess of the opportunity cost of the investment – this means an amount of money earned that exceeds that which is economically necessary) and (b) based on the globally consolidated profit of multinationals (global profit of the entire group) allocated to countries according to sales.