Does the EU need a windfall tax? We’re facing an escalating food crisis, the war in Ukraine and the COVID-19 pandemic. At the same time unprecedented inflation rates have had devastating effects on the vast majority of the population. However, a few people and corporations have heavily benefited from them, which has only driven inequality even further. A recent study by Oxfam International highlighted that every 30 hours there was a new billionaire in the world. At the same time every 33 hours a million people drop into risk of extreme poverty.
Back in March 2022, we asked the Council and the Commission to come up with coordinated action to tax windfall profits. Windfall profits occur if big energy companies that had dramatically increased their profits in the context of the war. Following our request, the European Commission submitted a recommendation to Member States to provide an answer to these extraordinary profits and tax them accordingly. This would help those suffering the most from the energy crisis in the EU. But only a few of the member states have moved forward, and it has definitely not been enough.
Tax the 1% who benefit from the crisis to help the 99% who suffer
It was a good first step, but we require stronger measures. What was once seen as an ‘energy crisis’ has now become a cost of living crisis – spearheaded by the food crisis. The consequences of these crises can be and already are brutal for the most vulnerable. To make things worse, a quick look into the market and we can immediately see that the largest corporations and conglomerates in fields such as food, big pharma, gas and oil, energy, and tech (to name just some of the more relevant ones) continue to make unprecedented profits at the cost of the rest of society. Banks and corporations across the EU keep telling citizens that a raise in their wages would only drive inflation out of control. In reality, it is the vast increase in corporate profits this time that cause the inflation.
An EU-wide windfall tax for those that profit from the war
A Union that prides itself in having the people at the heart of its policies cannot and should not allow that the very few continue profiting at the expense of the 99.9%. For this, and given the extraordinary situation we find ourselves in, we call for the Member States and the Commission to show serious ambition. We need to establish a coordinated approach to effectively address the cost of living crisis caused by corporations. The EU needs to implement a retroactive one-off windfall profit tax of 50% to all of the corporations that have seen an dramatic increase in their profits since the start of the war. We can then use the resulting revenues as a direct subsidy to those most affected by the crisis.
We can calculate the retroactive one-off windfall profit tax by looking at the average profits of the previous five years. After, we compare these profits with the profits made in fiscal year 2022. The windfall tax would then tax the increased profit at 50%.
For a just transition we need to put money where people need it the most
These revenues should be used by Governments to help citizens in a just transition to renewable energies through direct subsidies. Besides taxing the excess profits at 50% we also ask companies to reinvest 25% of excess profits in renewable energies.
It is time to get serious and tackle the power that corporations have over people. Food giants cannot be gouging the prices of food at the expense of citizens. Energy giants cannot be making billions in profits when citizens have to choose between freezing or eating. It is time to take action. If the Commission is as serious as it says about ending inequalities and fighting for a green future, then it should fight for a harmonised windfall tax. We also need follow-up proposals so we never face this situation again. Let’s use this opportunity to invest in a future where we finally show respect for the people and the planet.