Five EU ministers call for new windfall tax on energy profits amid price surge

Germany, Italy, Spain, Portugal and Austria have asked the EU for energy companies to help alleviate the burden on consumers and taxpayers triggered by the war in the Middle East, using the extra profits that companies are accumulating thanks to rising fuel prices.  The five Ministers of Economy and Finance wrote this in a letter addressed to EU Climate Commissioner Wopke Hoekstra, pointing out that actions taken at national level on excise duties must be accompanied by a joint effort. "It would make it possible to finance temporary relief, especially for consumers, and curb rising inflation, without placing additional burdens on public budgets," reads the letter signed by ministers Markus Marterbauer, Lars Klingbeil, Giancarlo Giorgetti, Joaquim Miranda Sarmento and Carlos Cuerpo. The plea comes as Brent crude oil has reached $100 per barrel, up from the $70 before the United States and Israel launched military attacks against Iran on February 28. With the effective closure of the Strait of Hormuz, global oil markets face increased demand and a sudden supply shortage, which further threatens price volatility.

'EU-wide contributory instrument' needed

In the letter to Commission Hoekstra, the ministers advocate reviving and boosting a mechanism similar to the EU’s 2022 “solidarity contribution,” which taxed roughly €28 billion on excess fossil fuel profits during the post-Ukraine war price spike, according to figures the Commission revealed. This time, the ministers argue the system should be applied across the whole EU, built on a stronger legal footing and better targeted at large multinational oil firms — including profits made abroad. "Given the current market distortions and fiscal constraints, the European Commission should swiftly develop an EU-wide contributory instrument, based on a solid legal basis," the five ministers argue. 

"It is important to ensure that this burden is distributed fairly. Such a European solution would act as a signal to citizens and the economy, showing that we are united and able to act", the ministers added. Fuel prices have risen dramatically across Europe due to the war, with Germany, Italy and Spain amongst the most affected countries. Hans Stegemen, chief economist at the Triodos Bank, said windfall taxes are "a no-brainer" when a crisis generates large windfall profits for fossil fuel producers at the direct expense of households and importing economies. "Fiscal policy has a clear role in redistributing those gains. Windfall taxes are a no-brainer," said Stegemen.

Earlier, the idea of suspending the EU's Stability Pact to give governments more leeway to deal with the crisis and a possible recession, was rejected by the European Commission.