[Windfall Tax on Oil Companies Also Under Scrutiny] ③ Europe and US Introduce Windfall Taxes... Emphasis on Sharing Pain of Energy Crisis

Rising Oil and Natural Gas Prices Due to War and Economic Bloc Formation
Windfall Taxes Introduced One After Another on Energy Companies in Europe and Other Developed Countries

[Asia Economy Reporter Jeong Dong-hoon] War and economic bloc formation are disrupting our daily lives under the name of 'heating bills.' Voices calling for the introduction of a 'windfall tax' to share the pain are louder than ever, citing examples from advanced countries such as Europe and the United States.

The windfall tax discussion gained momentum after the outbreak of the Russia-Ukraine war last year and the resulting economic sanctions caused energy prices to soar. While energy companies are making huge profits, the lives of low-income groups, small and medium-sized enterprises, and small business owners have become increasingly difficult due to energy prices rising several times over. The windfall tax focuses on sharing the burden to help low-income groups and businesses struggling during the energy crisis.

Legislation is already underway overseas, mainly in Europe. The European Union (EU) Commission announced in September last year that it would temporarily introduce a windfall tax with a minimum rate of 33% on profits exceeding 20% for companies that have earned more than 20% profit since 2018. The EU's windfall tax applies to profits made this year and next year. Europe plans to collect a total of 140 billion euros (approximately 195 trillion won) through this measure and provide subsidies to households and businesses suffering from soaring electricity and heating costs.

Separately from the EU decision, European countries are introducing windfall taxes through domestic legislation one after another. The United Kingdom applies the highest 'windfall tax rate.' The UK imposes a 45% windfall tax on power companies and plans to raise the corporate tax rate for oil and gas companies from 25% to 35% starting January next year. The application period is from January 1 this year to March 2028. It plans to raise a total of 14 billion pounds (about 22.34 trillion won) in the 2023/24 fiscal year and 40 billion pounds (about 63.82 trillion won) over the next six years.

Italy plans to raise the tax rate on energy companies from 25% to 35% by July this year. Germany also plans to impose a 33% windfall tax on oil, coal, and gas companies that earned profits above the 2018-21 average or are expected to see profits increase by more than 20% next year.

The International Energy Agency (IEA) estimates that last year, the net profits of oil and natural gas companies reached 4 trillion dollars (about 5,078 trillion won), nearly double that of the previous year. The United States, which values corporate freedom, also hinted at introducing a windfall tax. President Joe Biden said at the end of last year, "If oil companies do not lower prices, they will have to pay more taxes on excess profits."

The windfall taxes currently introduced or discussed domestically and internationally are limited to industries where excess profits beyond the normal range have been confirmed. While some excess profits are reclaimed, energy companies still enjoy huge profits. Professor Na Won-jun of the Department of Economics at Kyungpook National University said about the windfall tax, "It is a temporary system limited to industries where excess profits occur," adding, "It is natural to primarily focus on oil refiners, private power companies, and financial companies that are making large profits. This is a legitimate demand from civil society, which is a broader extension encompassing the economy."

This content was produced with the assistance of AI translation services.