EU: Should oil companies’ windfall profits be taxed? It’s up to individual Member States

Brussels – Taxing the windfall profits of energy companies falls within the remit of the European Union’s Member States. This is the European Commission’s position regarding the letter sent last weekend by Italy and five other EU countries calling for an EU-wide tax on the windfall profits of energy companies. “Taxation of windfall profits falls within the remit of the Member States, which may take action based on national legislation,” said a spokesperson for the EU executive, specifying that “such measures must comply with European law.”

 In fact, Brussels stressed that “Member States can already use their national tax powers to address costs relating to social equity and, if they so wish, devise measures to tax windfall profits, as set out in the AccelerateEU communication of 22 April.” In this context, the Commission “will respect Member States’ decisions and provide assistance and best practice on national measures, whilst also assessing their impact on the single market.” 

Last weekend, six European Union countries sent a letter to the Irish Minister for Finance – the country currently holding the rotating presidency of the EU Council – calling for a discussion at the ECOFIN meeting on the introduction of a common framework for taxing oil companies’ windfall profits, following the surge in fuel prices linked to the war in Iran. The finance ministers of Germany, Italy, Austria, Poland, Spain, and Portugal signed the letter. “Oil companies are benefiting from overall profitability and margins on refined products that exceed the rise in crude oil prices,” the letter states. “We are experiencing one of the greatest supply shocks of recent decades, and discontent is growing worldwide over the rising cost of living.”