The European Union is considering a Europe-wide tax on oil and gas companies' excess profits as member states seek ways to help citizens hit by soaring energy prices.
The European Commission is setting up a task force to look at the pros and cons of such a measure and whether it can be implemented, EU Commissioner for Climate Action and Taxation Wopke Hoekstra told Reuters.
“Citizens, and especially vulnerable citizens, are facing serious increases in their energy bills. And some companies are making really excessive profits without delivering any additional services or products,“ Hoekstra said.He said companies were profiting from the turmoil in energy markets. Hoekstra stressed that for many citizens and politicians this seems unfair, but warned that any future measure must undergo a careful legal assessment.
Six countries insist on a common approach
Germany, Spain, Portugal, Italy, Poland and Austria have called on the European Union to consider a common tax on windfall profits for energy companies.
The idea comes against the backdrop of a sharp increase in oil prices. Futures for the benchmark Brent crude oil reached nearly $120 per barrel at the end of April and are still more than 70 percent above their level at the beginning of the year. This has increased the income of producers and refiners.
The increase in prices is related to the military conflict around Iran, disruptions in shipping through the Strait of Hormuz and attacks on countries in the Persian Gulf. Governments across Europe are trying to limit the pressure on households and businesses, with no clarity on the size or scope of any potential EU tax.
The 2022 precedent
The EU has already introduced a tax on excess profits for oil, gas and coal companies, as well as refineries, in 2022. The measure was adopted after a sharp rise in energy prices following Russia's full-scale invasion of Ukraine.
Some companies have challenged the tax as illegal. The cases on the measure are still ongoing, which Hoekstra said is one of the issues the European Commission needs to consider when drafting a new proposal.
Some countries have already taken independent action. Portugal has introduced a 33 percent tax on windfall profits of oil companies and refineries for 2026. However, there is no final decision at the EU level, and the first step is the analysis of the European Commission working group.
Sources: marketscreener.com