The EU Imposing the Windfall Tax – Why Experts Criticize

At the end of September, a meeting of EU energy ministers is planned. They will discuss the current energy crisis. The European Commission is pushing forward the idea of ​​imposing the so-called windfall tax, i.e. tax on windfall profits. This idea has been criticized by experts.

On September 30, an extraordinary meeting of EU ministers on the energy crisis is scheduled. The goal is to agree on actions that will allow for the reduction of high energy prices. The meeting of EU ministers whose competencies include energy issues was convened by Josef Sikela, the Czech Minister of Economy (the country currently holds the EU presidency).

On the part of the European Commission, there was an idea to impose the so-called windfall tax. Energy companies would pay it – 33 percent of profit. It is a tax on profits that result from sudden and unexpected increases in revenues for a specific company or industry, caused by geopolitical disruptions, war, or natural disasters, which excessively fuel demand or cause supply disruptions. The idea is criticized in an interview with the INNPoland website by Dr. Sławomir Dudek, chief economist of the Civic Development Forum (FOR).

Higher profits of energy companies are the result of the market. This repeats itself over the course of business cycles. There are times when profits are higher, and when there is a downturn, profits decrease. The question is whether there will be a refund of this money in case of extraordinary losses. Because that’s how the economy works. This is not collusion, no action of companies that use something, but this is how the laws of the market work – Dr. Dudek notes.

The expert emphasizes that such interference in the profits of companies, regardless of whether it would be introduced on the basis of decisions of individual governments or at the EU level, is an asymmetric activity. 

According to Dudek, we cannot talk about “extraordinary” profits of companies, as they result from the economic cycle and natural economic processes. In the case of state-owned companies, these funds are already public. – In my opinion, it will be a bad solution and may destroy investment processes, and some companies with a different model, at a different stage of development, may lose a lot of it and find themselves in a difficult situation – he adds.