Oil And Gold Forecast, News and Analysis:
- Home
- Latest Energy News
Germany’s Top Court Backs Energy Windfall Tax
Germany’s Federal Constitutional Court has backed the country’s energy windfall tax and rejected a suit targeting a levy introduced two years ago, Bloomberg has reported, with the suit filed by 22 power producers who argued the levy was unconstitutional.
“In this exceptional situation, the redistribution of the so-called surplus revenues achieved creates an appropriate balance between the favored electricity producers and the burdened electricity consumers,” the court has ruled.
‘;document.write(write_html);}
Two years ago, shortly after oil and gas prices skyrocketed following the global energy crisis, the European Union, the UK and India introduced windfall taxes on oil and gas companies.
‘;document.write(write_html);}else{var write_html=’
ADVERTISEMENT
‘;document.write(write_html);}
In September 2022, the Council of the European Union agreed to impose a “temporary solidarity contribution” on energy companies that realize “above a 20% increase of the average yearly taxable profits since 2018”. This tax will be levied on top of whatever taxes these companies already owe in their individual countries.
A windfall tax is a one-time surtax levied on a company or industry when unusual economic conditions result in large and unexpected profits.
According to a recent Wood Mackenzie report, while 2022 was the year in which the idea of the windfall tax and the villainization of BIg Oil reached a new peak, the levy was likely to stick if oil prices remained high. If prices drop, windfall taxes could be eliminated; however, Wood Mackenzie said this was “unlikely”, noting at the same time that some windfall taxes have expiration dates and clauses for modification based on oil prices. Overall, WoodMac warned that windfall taxes will distort the market and even risk prolonging–or delaying–the energy transition. How? If fossil fuel prices are lower, demand will increase and render renewables less attractive.
In the meantime, Western governments crafted another way to benefit from soaring oil and gas company profitability–taxing share buybacks, such as has been done in the U.S. and Canada. Dividends could also be taxed more heavily. Both methods, suggests Wood Mackenzie, would actually “incentivize reinvestment, thus promoting jobs and additional energy supply”.
“A tangle of long-term ambitions will drive upstream regulators and investors toward the big fiscal themes to look for, from windfall taxes to renewed interest in gas policy terms,” WoodMac said.
By Alex Kimani for Oilprice.com
More Top Reads From Oilprice.com
- The Real Reason Why UK Gasoline Prices Remain Skyhigh Despite Recent Drop
- Goldman Sachs Expects Brent Oil to Average $76 Per Barrel in 2025
- Trump Urged to Make Oil-for-Migrants Venezuela Deal
Join the discussion | Back to homepage
Source: https://oilprice.com/
More Stories
Russia’s Baltic Oil Shipments Drop 10% After EU sanctions
Fire at Huge California Battery Storage Plant Forces Evacuations
EU, Mexico Sign Trade Deal Ahead Of Trump Inauguration