The Czech Republic is the latest country to levy windfall taxes on energy companies to raise funds to continue subsidizing high energy costs, Bloomberg reported on Friday.
Czech lawmakers have approved Finance Minister Zbynek Stanjura’s proposal to impose a one-off 60% tax on the country’s major energy companies. The windfall profits tax, which government leaders have dubbed a “surtax”, is set to run for the next three years and aims to deprive oil and gas of much of its windfall profits thanks to recent hikes in oil and gas prices.
Stanjura protested that he “takes no joy” in levying the windfall tax – the latest in a series of similar taxes imposed in other countries. “If circumstances allow, I will be the first to propose its deletion,” the finance minister said on Friday.
Those circumstances would likely be falling oil and gas prices – and oil and gas company profits.
For the oil companies, it’s a lose-lose scenario. If oil and gas prices fall, the tax may be relaxed or even removed, but their profits will fall along with price movements. If oil and gas prices stay high, the government will get 60% of its profits. Unipetrol, the Czech unit of Polish refinery PKN, said the new tax would be painful, dampening investor appetite and drying up funds it needs for upgrades.
Energy utility Energeticky a Prumyslovy Holding, or EPH, told media on Friday it would move its commodity trading operations to another country to circumvent the new tax.
The tax is expected to send another $3.5 billion into state coffers next year, according to Finance Department calculations provided by Bloomberg, which will be used to soften the blow of the cost-of-living crisis by subsidizing electricity and natural gas bills.
By Julianne Geiger for Oilprice.com
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