Experts called the European Commission’s proposed temporary solidarity contribution a good solution on Tuesday 29 November at a debate on how to tax the excess profits of energy companies, organised by the EU Tax Observatory. They also welcomed the Observatory’s proposal to tax the rising market capitalisation of energy companies.
As a reminder, the temporary mandatory solidarity contribution targeting companies in the crude oil, fossil gas, coal and refining sectors leaves the possibility for Member States to calculate this contribution on the basis of the taxable profits of these companies in the tax year starting in 2022 and/or 2023. Thus, profits that are greater than a 20% increase in average annual taxable profits since 2018 will have a rate of at least 33% applied as contribution (see EUROPE 13033/1).
Quentin Parrinello, policy officer at Oxfam France, considered that using the word ‘contribution’ instead of ‘tax’ was “a smart way to get around it (the problem) and adopt it quickly”. “It is essentially an excess profit tax that looks at these profits as neither the results of innovation nor the results of productivity gains”, he said.
However, he regretted that this contribution only concerns companies in the energy sector. According to him, some sea freight and food companies have also made windfall profits.
For Arthur Guillouzouic-Le Corff, economist and researcher at the Institute of Public Policy, “ the way the EU is done, it is actually quite smart in the sense that it’s not too subject to shifting”.
David Amiel, French MP for the Renaissance group and member of the Finance Committee in the French National Assembly, welcomed this “European solution”. “It was very important, from an economic point of view, not to have distortions within the European market”, he said. “We didn’t want to tax our electricity producers much more than the electricity producers behind our borders and we didn’t want to tax much more than our neighbours activities that could easily be relocated to some other Member States”, he added.
Manon François, an economist and researcher at the European Tax Observatory, detailed the idea presented in September of taxing the rise in market capitalisation (see EUROPE 13033/18). “The gains are much higher than what has been announced for the moment through the solidarity contribution”, she argued, estimating that this tax could bring in €65 billion, compared to €25 billion for the solidarity contribution.
Quentin Parrinello found this approach “quite innovative and appealing”. (Original version in French by Anne Damiani)