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It’s boom time for fossil fuel companies – and it’s fueling a growing clamor for Europe’s governments to increase their tax take.
In the space of a week, many of Europe’s biggest oil and gas firms announced record profits for the past year – largely on the back of rising energy spending driven by Russia’s war on Ukraine.
On Wednesday, France’s TotalEnergies announced a net profit of $20.5 billion and a generous payout to shareholders – prompting protests outside its Paris headquarters led by Friends of the Earth France. preacher Condemnation The company’s “surplus” comes at a time when the energy crisis has left millions in France – and Europe – in fuel poverty.
Across the channel, BP on Tuesday announced a net profit of $27.7 billion for 2022. The country’s Labor opposition has called the income increase “the fallout of war” and Prime Minister Rishi Sunak has demanded the company extend and strengthen the UK’s existing windfall tax on oil. UK regional gas production. Norway’s Equinor, meanwhile, announced a record net profit of $28.7 billion in the year it replaced Russia as the European Union’s largest gas supplier.
A week earlier, Shell said it had earned about $40 billion — more than double its 2021 profit.
Successor declarations have focused on how governments can use the tax system to access oil company profits and use the revenue to both reduce energy costs for consumers and support the green transition. In the US, President Joe Biden on Tuesday called Big Oil’s profits “outrageous” and proposed quadrupling taxes on corporate stock buybacks; ExxonMobil posts record $56 billion profit for 2022
The EU already has a windfall tax – called the “temporary solidarity contribution” – of 33 percent on profits that exceeds the four-year average of 20 percent. It was launched in September, with proceeds intended to provide financial support for citizens and businesses struggling with high electricity prices. Many countries have their own claw-back schemes.
Shell said it paid $134 million in UK windfall taxes and $520 million to the EU.
Here comes the taxman
But the bumper profits are calling for a little more grip on the authorities.
“I think it’s popular for some politicians to call for it. The gains are exceptional and those who say they are benefiting from the invasion have some good arguments – but in practice it can be difficult,” said an EU diplomat from a western European country.
ExxonMobil is suing the European Commission over tax policy – making any concerted effort to strengthen EU policy unlikely until the case is settled.
However, a senior Commission official said the string of profit announcements – coupled with the continued hardship people are facing paying their energy bills – demonstrated the “moral case for solidarity contributions”.
Those calls are already ringing in the European Parliament.
“These huge profits are particularly unfair in today’s society,” said David Cormand, a French lawmaker on parliament’s budget and consumer protection committee. “There is clearly a dilemma between these absolutely mind-blowing profits and the environmental impact created in the production of these profits.”
Last week, Green lawmakers introduced an amendment A parliamentary resolution urged the commission to consider a windfall tax framework for energy companies and a tax on share buybacks.
“We need to regulate an economic sector that today makes excessive profits and on top of that is not taxed in a way that matches these high profits,” Cormand said.
“There is no good reason not to expand the scope of windfall taxation,” said Aurore Laloque, a French MEP with the Socialists and Democrats and a member of the economic and monetary affairs committee.
“New legitimate reasons for implementing a larger windfall tax are emerging every day… Super profits are perhaps the best example of all of what they are and why they should be taxed”. “It perfectly illustrates the arrogance of those who believe they owe nothing to the rest of society.”
So far, EU governments have remained tight-lipped about the gains. In France, government spokesman Olivier Veran acknowledged on Wednesday that the scale of TotalEnergy’s earnings “could be shocking” but noted that these were global profits, not in France, highlighting the problems countries may face in finding ways to stop the giant multinational’s profits. whose production activities often take place far from national jurisdictions.
But Matthew Lawrence, director of the UK-based Common Wealth think tank, said the level of public anger over the rising cost of living could embolden politicians.
“People are facing the biggest pressure on their living standards in a generation – and when they open their newspaper and turn on their TV they catch a glimpse of the announcement of record profits,” he said. “These numbers are going to create a political shock and there will be political gain for people who say this is not acceptable and we need to change the way our energy system works and is designed.”