Five European Union finance ministers have called for a windfall tax on energy companies as fuel prices rise due to the ongoing war between the US, Israel and Iran, according to a joint letter to the European Commission seen by Reuters on Saturday.
A windfall tax is a higher, temporary tax imposed by governments on specific companies or sectors that experience unexpectedly large profits due to unforeseen external events.
The finance ministers of Germany, Italy, Spain, Portugal and Austria called for it in a letter on Friday, saying such a measure would signal that “we are united and able to act”.
“It would also send a clear message that those who profit from the consequences of war must do their part to ease the burden on the general public,” the ministers wrote.
Energy prices rise during war in the Middle East
Oil and gas prices have risen since US-Israeli strikes on Iran began on February 28, sparking widespread fears of disruptions to global energy supplies. The conflict has also led to the effective closure of the Strait of Hormuz, a vital corridor through which roughly a fifth of the world’s oil and liquefied natural gas supplies pass.
The disruptions created a price shock similar to the energy crisis Europe faced after Russia invaded Ukraine in 2022, even though EU countries are now getting more energy from renewable sources, Reuters said in a report.
In a letter to EU climate commissioner Wopke Hoekstra on Friday, ministers pointed to a similar emergency tax in 2022 to tackle high energy prices.
“Given the current market distortions and fiscal constraints, the European Commission should rapidly develop a similar EU-wide contribution instrument based on a solid legal basis,” they wrote.
However, the letter did not give any details on how much of the windfall tax ministers were proposing, or which companies it would apply to.
EU can revive energy crisis measures – what do they include?
The bloc’s energy chief said on Tuesday he was considering reviving energy crisis measures that were used during the Russia-Ukraine conflict in 2022, including proposals to limit electricity tariffs and taxes.
The EU introduced a set of emergency policies in 2022 after Russia suspended gas supplies. They introduced Europe-wide gas price caps, a windfall tax on energy companies and targets to curb gas demand.
Read also | Senegal bans officials from travel as Iran war oil shock strains government budgetRead also | Seventh Indian LPG tanker crosses Strait of Hormuz amid US-Iran war
Europe relies heavily on imports for its fuel requirements, so it is particularly exposed to fluctuating global energy prices as a result of the conflict in the Middle East. Since the start of the US-Israel war with Iran on February 28, European gas rates have risen by more than 70%. The war has now entered its fifth week.
European Energy Commissioner Dan Jorgensen said that in the short term, Brussels is particularly concerned about the supply of refined petroleum products such as jet fuel and diesel to Europe, Reuters wrote.
(with wire inputs from Reuters)
