Inflation: Which countries are already levying a tax on corporate super-profits that is being discussed in France?
Almost $6 billion. This is the net profit generated by TotalEnergies in the second quarter of 2022, according to the group’s announcement on Thursday, July 28. A tally that’s more than double last year’s second quarter earnings, which is making people cringe and could reignite the debate about “super profits” against the backdrop of the war in Ukraine and an inflationary context.
At first, Nupes and the National Rally (RN) continued to support the idea of a tax “super wins” large groups had found an echo in part of the presidency majority and within the Les Républicains (LR) party, but was rejected by a few votes on July 23 when the National Assembly considered the amendments to the draft amendment to the finance law.
the @governmentFR opposed an extraordinary taxation of gains related to the rise in energy
Here are the results published by TotalEnergies
↗️ Profit at 18.7 billion at the end of June, ×3 compared to 6/21
To compare with the 500 million granted for lowering the price at the pump pic.twitter.com/jTDM6kZkcH
— Valerie Rabault (@Valerie_Rabault) July 28, 2022
On the French side, Prime Minister Elisabeth Borne closed the door on the taxation of super profits on Thursday, but some countries abroad are thinking about it. And others have even taken the plunge. Franceinfo returns to the way France’s neighboring countries took up the debate.
In Britain, a tax on the profits of the oil giants
The liberal British Parliament passed a law to this effect at the end of May. To fund a £15 billion (about €17.5 billion) plan for the most deprived households, the country has decided, after weeks of negotiations, to introduce a temporary 25 percent tax on the profits of oil and gas giants like BP.
“As fuel prices return to historically low levels, leverage will be phased out with the introduction of a sunset clause into the law.”, then-Finance Minister Rishi Sunak said today in the race to succeed Boris Johnson as Prime Minister. In order to advance the energy transition, the the relevant measure also provides that the tax is reduced by a “Generous investment rate of 80%” if the targeted energy giants invest in low-carbon energy.
This temporary tax aims to fund a third of the new welfare measures, which will bring in around £5billion over the next 12 months. Almost one in eight of the most vulnerable UK households will receive at least £1,200 in 2022, including a one-off living cost payment of £650, the UK Treasury announced in late May.
In Spain, a tax for banks and electricity companies
The country took the plunge in mid-July when Spanish Prime Minister Pedro Sanchez announced that energy and finance companies would introduce special taxes in 2023 and 2024 to help the population absorb soaring prices.
“This government will not allow companies to take advantage of the crisis to enrich themselves.“, assured the Socialist Prime Minister before the Spanish Chamber of Deputies. Thanks to these taxes, the government hopes to collect almost 7 billion euros between 2023 and 2024, with profits estimated at almost 2 billion euros a year, for electricity companies and 1.5 billion for banks .
The announcement came as part of a series of social measures to protect purchasing power from inflation, which topped 10% for a year in June. These include fuel subsidies, a reduction in VAT on electricity and an increase in old-age pensions. Pedro Sanchez noted this in early July “i.eSince prices started to rise (…) Spain has mobilized 30 billion euros” to support its businesses and consumers, “corresponds to 2.3% of gross domestic product”.
In Italy, the big companies in the energy sector are being targeted
Italy, for its part, announced at the end of May its intention to raise its tax on superprofits to 25%, which is the same rate as in the UK. At the end of March, the country decided by decree to introduce a 10 percent tax on the profits of large companies in the energy sector – such as Enel or Eni – which were made thanks to the price surge resulting from the war in Ukraine. “Let’s give this money to businesses and families that are in big trouble”declared the then Italian Prime Minister Mario Draghi.
The government is hoping for 11 billion euros from this tax. But the estimate has been repeatedly questioned by companies, who say their profits may not be as high as oil and gas prices suggest. The money raised by this new tax is set to fund a €14 billion package of measures aimed at mitigating the rise in energy prices for households and businesses. In particular, the envelope includes a bonus of 200 euros for 28 million Italians with an annual income of less than 35,000 euros.
According to data from Istat, Italy’s national statistics institute, inflation was 8% yoy in June, up more than a point from the previous month. This is the highest level since January 1986.
In Germany, the taxation of refineries is constantly being considered
Economics Minister Robert Habeck, member of the Greens and Vice Chancellor of the Federal Republic of Germany, has spoken out in favor of a tax on refineries. He wants to present a text in the coming weeks to attack the profits of large corporations.
This solution is proposed by the federal government to counteract the failure of the mineral oil tax reduction. On June 1st, Chancellor Olaf Scholz announced an extraordinary fuel discount for three months, Reduce household bills in the face of rising energy prices. But the expected effect of this discount on motorists did not materialize. “Since the beginning of June, the price of petrol at the pump has risen steadily and for diesel and petrol around 2 euros per liter, i.e. at the standard level before this measure”reminded franceinfo at the end of June. Inflation reached 7.5% over one year in July, ie 0.1 percentage point less than in the previous month.