Sant: windfall tax for profits during crisis can cushion inflation impact

MEPs debate proposals for tax on surplus revenues for economic sectors that have made windfall profits

Labour MEP Alfred Sant
Labour MEP Alfred Sant

Labour MEP Alfred Sant has expressed support for a windfall tax on energy producers, as the European Parliament debated the outcome of a new Regulation that allows a temporary “solidarity contribution” imposed on fossil fuel producers.

Sant argued that these economic sectors should be identified in a stringent manner and the nature of their windfall receipts duly accessed.

“On this basis, non-punitive taxes on their windfalls should be defined and charged, on a once-only basis or for the duration of the crisis and their persisting high profitability,” Sant said.

Pointing out that it is not clear that doing this on a European rather than on a national basis would be fairer or more effective, he emphasized that this problem needed to be clarified as soon as possible, politically and economically.

Sant said care should be taken in the implementation of a windfall tax, no matter how structured to ensure it would not unbalance markets in the medium term.

In September, energy ministers agreed to regulate energy prices and call for voluntary reductions in electricity consumption.

Ministers also introduced an EU regulation on emergency measures to reduce energy prices entered into force, specifically to redistribute the energy sector’s surplus revenues to households and SMEs.

The windfall taxes could either limit revenues of electricity generators with a €180/MWh cap on “infra-marginal technologies” for renewables, nuclear and lignite; or a mandatory, temporary solidarity contribution on the profits of businesses active in the crude petroleum, natural gas, coal and refinery sectors.

The solidarity contribution will be calculated on taxable profits for 2022 and 2023.

MEPs at last week’s plenary commented on the Ukraine war and the resultant skyrocketing prices, in particular of food and energy, that had brought the need for extraordinary public sector action.

“The mobilisation of new funds in significant volumes is an imperative prerequisite,” Sant said. “These funds would cushion the impact of inflation on citizens and families badly hit by soaring prices and provide support to SMEs adversely affected in their competitive stance.”

Sant emphasised the need to help the citizens worst-hit by inflation, but said this could not be done by issuing new debt. “It would be prudent to tax those economic sectors which, contrary to the rest have seen their profits rise hugely as a result of the crisis.”

Members of the European Parliament discussed the merits and the most effective ways of imposing a windfall tax on energy companies’ profits. In a resolution adopted in May, they had called for such a tax in principle. But two weeks ago they rejected a call for a tax on the excessive profits of corporations benefiting from the crisis.

A windfall tax is a tax applied to companies that generate a significant increase in their earnings due to circumstances or events for which they are not responsible.

Other MEPs in the debate shared similar concerns. Irish MEP Seán Kelly (EPP) said it was only right to apply a windfall charge to actually give that money back to citizens. “To reduce energy bills for consumers in the longer term, the answer is clear: embrace the energy efficiency principle and get renovating the built environment. But for now, the windfall profits being made by producers and, above all, by traders of the energy system must be subjected to storm force taxes. These astronomical and immoral profits must be taxed as soon as possible.”

Irish MEP Ciarán Cuffe (Greens) said that in an age of private yachts and super-jets, “as the super-rich get richer, it is time for windfall taxes.”

“Introduce a windfall tax, differentiate between fossil fuels and renewables and share the revenues with households. We also need to ban evictions and disconnections and we need to increase the minimum wage to a living wage.”