Germany plans 33% tax on gas, coal and oil firms

Required by EU law:
The tax could be seen as a contravention of the principle of equality through an unequal treatment of companies, tax law experts said

The German government plans to introduce a special levy to skim off 33 percent of windfall profits made by oil, coal and gas companies, which could generate revenue of 1 billion to 3 billion euros (US$1.04 billion to US$3.12 billion), German Ministry of Finance sources said.

The levy, called “EU energy crisis contribution,” would affect a low double-digit number of companies, targeting profits from this year and next year, and would be implemented by the end of this year, the sources added.

Germany has been in talks over the levy at the EU level and has examined several ways to implement the tax, the sources said, adding that the chosen instrument has the fewest legal risks.

German Minister of Finance Christian Linder said Germany was obliged to implement the levy, but made clear it was legally tricky.

“This requirement from European law leads us onto thin ice in German tax law, but it must be implemented,” Linder told a conference.

“We at the finance ministry are making a suggestion to parliament on how to do this in the most responsible way in terms of the constitution,” he added.

The tax could be challenged legally as a contravention of the general principle of equality through an unjustified unequal treatment of companies, tax law experts said.

However, two reports by the scientific service of the German Bundestag, the lower house of parliament, argue that a windfall tax is legally possible in Germany, a Tax Justice Network study said.

The planned oil and gas sectors levy is different from another one Germany announced on Tuesday which would apply to electricity windfall profits from Sept. 1, and last at until at least June next year.

The new levy would affect oil, coal and gas companies and refineries whose profits for this and next year exceed by 20 percent or more their average from 2018 to last year, a draft ministry document showed.

Germany’s traditional and renewable energy lobbies criticized both levies as too bureaucratic and hardly feasible. They said the government should apply the tax to profits not to revenue, as costs for companies have also risen with the jump in gas prices.

German Alliance 90/The Greens party financial spokeswoman Katharina Beck said the planned levy could probably be circumvented on a large scale by companies moving profits abroad, limiting its revenue.

“The draft of the finance ministry for windfall profit levy for oil and gas companies falls well short of what is necessary,” Beck said in a statement.

The gas and oil windfall tax should be 60 percent to 80 percent, to roughly correspond to the 90 percent electricity sector levy, Beck added.