Germany plans 33% windfall tax on gas, coal and oil firms – sources

BERLIN (Reuters) -The German government plans to introduce a special levy to skim off 33% of windfall profits made by oil, coal and gas companies, which could generate revenue of between one and three billion euros, finance ministry sources told Reuters.

The levy, called “EU energy crisis contribution”, would affect a low double-digit number of companies, targeting their 2022 and 2023 profits, and would be implemented by the end of 2022, the sources added.

Germany has been in talks over the levy at the European Union level and has examined several ways to implement the tax, the sources said, adding that the chosen instrument has the least legal risks.

Finance Minister Christian Linder said Germany was obliged to implement the levy but made clear it was legally tricky.

“This requirement from European law leads us onto thin ice in German tax law but it must be implemented,” Linder told a conference.

“We at the finance ministry are making a suggestion to parliament on how to do this in the most responsible way in terms of the constitution,” he added.

The tax could be challenged legally as a violation of the general principle of equality through an unjustified unequal treatment of companies, tax law experts say.

However, two reports by the scientific service of the Bundestag, the lower house of parliament, argue that a windfall tax is legally possible in Germany, the Tax Justice Network study said.

The planned oil and gas sectors levy is different from another one Germany announced on Tuesday which would apply to electricity windfall profits from Sept. 1, 2022, and last at until at least June 2023.

The new levy would affect oil, coal and gas companies and refineries whose profits for this and next year exceed by 20% or more their 2018-2021 average, a draft finance ministry document seen by Reuters showed.

Germany’s traditional and renewable energy lobbies criticized both levies as too bureaucratic and hardly feasible. They said the government should apply the tax to profits not to revenue as costs for companies have also risen with the jump in gas prices.

Katharina Beck, spokeswoman on financial matters for the Greens, said the planned levy can probably be circumvented on a large scale by companies moving profits abroad, limiting its revenue.

“The draft of the finance ministry for windfall profit levy for oil and gas companies falls well short of what is necessary,” Beck said in a statement.

The gas and oil windfall tax should be between 60% to 80% to roughly correspond to the 90% electricity sector levy, Beck added.

(Additional reporting by Madeline ChambersReporting by Christian KraemerWriting by Riham AlkousaaEditing by Tomasz Janowski, William Maclean)