THE European Commission is to propose a windfall tax on energy firms in a bid to protect EU citizens from skyrocketing energy bills – sparking renewed calls for the UK to follow suit.
In a speech to the European Parliament, Commission president Ursula von der Leyen said: “In these times it is wrong to receive extraordinary record revenues and profits benefitting from war and on the back of our consumers.
“In these times, profits must be shared and channelled to those who need it most.”
The plan would force oil, gas, coals and refining firms to make a “solidarity contribution” of 33% of their taxable surplus profits from the 2022 fiscal year - money which could go to supporting families amid the energy crisis.
For the scheme to go ahead, an agreement will have to be made by EU member states – which could be found when EU national energy ministers meet on September 30.
Prime Minister Liz Truss has ruled out any plans for a future windfall tax in the UK.
Earlier this month she said: “I am against a windfall tax. I believe it is the wrong thing to be putting companies off investing in the United Kingdom.”
Commenting on the different strategies, Richard Murphy, founder of the Tax Justice Network, said the EU is “recognising something that Liz Truss is refusing to do”.
He said: “This is that the increase in energy company profits this year is not due to any skill on their part.
"Instead, it's due to Putin's War, their market power, and the fact that they know we cannot do without the gas and oil they supply - which means we have to carry on buying from them just about whatever they charge.
“They're exploiting us. The EU is set to combat that. Truss will not. She will instead make pay in a different way - by a cut to public services, which will inevitably follow from Truss's decision and her desire to balance the Government's books.
"You could not make such a policy, that rewards the profiteering few at cost to the exploited many, up unless it was going to happen before our own eyes in our own country."
Tax law expert and director of the Good Law Project, Jolyon Maugham, also called for the UK Government to take note of the proposal.
He wrote on Twitter: “We are not doing this. Instead we are passing public funds amounting to roughly the annual budget of the NHS to Big Oil.”
Peter Kelly, director of the Poverty Alliance, stressed how “unjust” it was for the UK to “place the burden of the energy price support on consumers”.
He said: “Many consumers are already in debt and are struggling to keep their heads above water on low incomes that simply don't meet their basic needs. The impact on future energy bills causes us real concern.
“Energy companies have made multi-billion pound profits over the last few years, and it is only right that those profits are taxed appropriately, and the money used to ensure a more just response to the costs crisis.”
This follows criticism of Truss’s move to freeze energy bills at £2500 with experts warning that richer households would disproportionately benefit.
Analysis by the Resolution Foundation, which focuses on raising living standards, said that because higher-income households typically use more energy, the richest fifth may gain an average of about £1300 this winter compared with £1100 for the poorest 20%.
The report said that the first major policy intervention by the new Prime Minister was “all-but-inevitable” given the colossal increases in energy prices but that support is not necessarily going where it is most needed.
According to the report, Truss’s plans to provide further cost-of-living support by scrapping the rise in national insurance “will skew support towards the very highest-income households”.
The UK Treasury and Department for Business, Energy and Industrial Strategy have been contacted for comment.
