Windfall profit taxes could distance the EU from its Net Zero Goal by 2050, according to the latest report from the business-friendly think-tank Tax Foundation Europe, published on Wednesday 11 September. These measures would distort the market, discouraging some companies from investing.
Given the difficulty of defining ‘supernormal profits’, this creates uncertainty for investors and requires a constant adjustment of the tax base. This market uncertainty caused by windfall profits taxes can push investment and production to foreign countries with more stable and predictable tax environments. And this reduction of domestic production leads to a loss of jobs and economic activity in the home country.
Instead, the Tax Foundation recommends launching long-term, pro-growth tax reforms that are better positioned to facilitate the EU’s climate transition. This would stimulate economic activity and incentivise energy diversification by supporting private investment.
Five Member States are still applying the solidarity contribution, introduced in 2022 to combat the energy crisis (see EUROPE 13155/15).
To read the study: https://aeur.eu/f/de9 (Original version in French by Anne Damiani)