Germany’s Fossil Fuel Firms Face 33% New Windfall Tax
Germany is implementing a special levy that will see the country’s oil, gas and coal firms pay 33% of windfall profits. The levy will potentially generate revenue of up to three billion euros.
Dubbed the “EU energy crisis contribution”, the tax is likely to affect a large number of energy firms and will target their 2022 and 2023 profits, Reuters said yesterday.
Quoting finance ministry sources, the report said the tax would be implemented by the end of 2022.
If implemented, the new levy will affect oil, gas and coal companies whose profits for the current year and the coming one exceed by 20% or more than their 2018-2021 average.
The tax, however, has a major drawback: according to Katharina Beck, spokeswoman on financial matters for the Greens, the planned levy can be circumvented on a large scale by companies moving profits abroad.
“The draft of the finance ministry for windfall profit levy for oil and gas companies falls well short of what is necessary,” Beck said in a statement.
Profits being earned by energy companies in many oil-producing countries courtesy of high commodity prices has attracted the attention, and sometimes ire, of governments with some imposing windfall taxes.
Last May, UK finance minister, Rishi Sunak imposed a windfall tax on oil and gas majors as the government tries to alleviate the country’s worsening cost-of-living crisis.
Chancellor Sunak said that the levy would be taxed on energy firms making “extraordinary profits” due to the spike in commodity prices. The British government imposed what it calls a “temporary targeted energy profits levy” with a so-called “investment allowance” levied at 25% to incentivize oil and gas firms to reinvest their profits.
Meanwhile, in August, Argentina introduced a one-time windfall tax on companies whose income tax determined for tax year 2021 or tax year 2022 is at least AR$100m (approx. US$752,000).
The measure is seen as an attempt by Argentina’s center-left government to reduce the fiscal deficit and contain runaway inflation, which is now approaching 70%.
Last month, U.S. President Joe Biden said he would impose higher taxes on oil companies that record “windfall” profits without reinvesting in production, “The oil industry has not met its commitment to invest in America and support the American people,” Biden said Monday, calling the industry’s profits “a windfall of war”