The European Commission will explore the prospect of EU-wide windfall taxes on energy companies, after pressure from Germany, Italy, Spain, Poland, Austria and Portugal to tackle high energy prices.
Economy Commissioner Valdis Dombrovskis told journalists on Friday that although the Commission believes member states are best placed to implement tax measures, finance ministers and the Commission “agreed to set up a working group to work on [windfall taxes].”
The move comes as refiners and oil and gas companies reap bumper profits stemming from the closure of the Strait of Hormuz, and as governments are under pressure to find new ways to support citizens and businesses with surging energy costs.
The European Commission applied windfall tax measures during the energy crisis in 2022 sparked by Russia’s full-scale invasion of Ukraine. The Commission used an emergency measure to implement an at least 33 per cent tax on energy companies’ excess profits that were more than 20 per cent above the average rate of the previous three years. The profits were collected by member states.
Finance ministers gathering in Luxembourg discussed the measure with Wopke Hoekstra, the commissioner in charge of taxation and climate policy, on Friday morning.
In 2022, the measure was implemented through an emergency procedure that enabled it to be passed by a qualified majority of member states.
Since closure of the Strait of Hormuz sent energy prices higher, the Commission has been reluctant to explore windfall taxes, instead saying that it will advise member states who wish to do so. A number of member states have taken national measures already.
Despite the commitment to explore the measure from Dombrovskis, officials have warned that ongoing legal cases linked to that solidarity measure make them wary of applying further taxes.
Oil and gas companies in Belgium, Ireland, Italy and other countries have challenged the legality of a 2022 windfall tax, and there are ongoing proceedings at the European Court of Justice over the measure.
Asked about the issue, Hoekstra told reporters that “you always need to look at the full solution space” but added that the measure was “not without complications” and that several member states are opposed to such a tax.