In the EU and in Germany, a proposal that makes corporations and shareholders shudder is getting more and more sympathy. It is a so-called “excess profit tax”. What is meant by this is a tax for companies that make money from the war in Ukraine. Energy suppliers and armaments companies must arm themselves.
In this country, the proposal originally came from the Greens and the Left. They want to skim off higher corporate profits that have their roots in the Ukraine war. With a view to the Russian attack, Green party leader Ricarda Lang said after a meeting of the party executive in Berlin: “If it is obvious that some corporations are knowingly and above all making excessive profits from the horror of this war, then we should introduce an excess profit tax , which actively counteracts this.” This tax would ensure “that those who participate financially, that we all get through this crisis well and, above all, with a stronger cohesion”.
Left-wing politicians Dietmar Bartsch and Christian Görke agree: “While millions of people and companies are burdened with ever higher energy prices, oil companies are making obscene profits.” They refer to the International Energy Agency, which reports additional profits for oil companies of 200 billion euros expected this year.
The parliamentary group has already tabled a motion calling on the federal government to “present a bill to introduce an EU-suggested excess profit tax that would give companies that made extra profits during the crisis a fair share of the social costs of the crisis.” . Regarding those who would be affected by the tax, Görke says: “We think that all large corporations that make extraordinary profits in crises should be taxed – from Amazon to Shell to Rheinmetall.”
The idea has also caught on in the government, with Green Economics Minister Robert Habeck rowing between the interests of his office and his party: he supports the idea, but warns of legal difficulties in implementing it. He thinks it’s right “that those who are currently making high profits at the expense of the general public give back part of it,” says Habeck, especially with regard to mineral oil companies. However, tax law is “a tough board,” emphasizes the minister. “And we haven’t drilled through that yet.”
The board – it is likely to lie primarily in the FDP-led Ministry of Finance, whose parliamentary state secretary, Katja Hessel, rejected the proposal. “Our companies are already being burdened several times: by the aftermath of the corona pandemic, the high energy prices and collapsed supply chains,” says the FDP politician.
A look at the EU shows that the proposal is not entirely out of thin air and has caught on even with conservative governments. Italy wants to tax the additional profits of energy companies in order to relieve families and companies. “Let’s tax some of the extra profits that producers are making thanks to the rise in the cost of raw materials and redistribute this money to companies and families that are in great difficulty,” demands Italian Prime Minister and ex-central bank governor Mario Draghi. According to his Economic and Finance Minister Daniele Franco, the tax is said to be 10 percent on additional profits, but he did not give any details.
Government circles in Rome said the tax would be levied on additional profits in the past six months compared to the same period last year. According to Draghi, the money raised will be used for a new €4.4 billion package of measures to cushion high energy costs.
In Austria, too, the discussion is picking up speed. The conservative Chancellor Karl Nehammer confirms that the federal government in Vienna is considering how profits from state-owned companies, which are benefiting disproportionately from the crisis, can be legally skimmed off. “Accidental profits from companies with state participation belong to the people,” says the Chancellor, specifically naming those companies that currently produce electricity from hydropower at the same costs as usual, but sell it on the market at significantly higher prices. In Austria, this particularly affects the Verbund group, which is majority state-owned. With his statement, the chancellor sent his shares plummeting.
In Greece, the excess profit tax has already been decided. Athens is asking the energy companies to pay up: for the time being, they should have to pay 90 percent tax on all profits that are above the average values of the previous year. From this, the government wants to pay for a relief program that reimburses households 60 percent of the increase in their electricity bills.
The trend is causing horror among economists and investors. The head of the Viennese think tank Eco-Austria Monika Köppl-Turyna speaks of “fatal signals” for future investments by all companies. Public finance scientist Dominika Langenmayr from the Catholic University of Eichstätt-Ingolstadt warns: “If you start introducing new taxes on successful market participants in special situations, you destroy trust in the tax system.”
And the investors have already decided with their feet: For the Austrian energy company Verbund, for example, Thursday last week was not a fun one. The group’s share price collapsed by 13 percent. That means a loss in value of 4.5 billion euros. The cause was the statement by the chancellor, who showed sympathy for the new tax. One trader on the Vienna Stock Exchange called the idea “brutally toxic”.
The original of this article “”Brutally toxic” – Investors dread taxes for war profiteers” comes from WirtschaftsKurier.
