Three years of taxation ahead, 125 billion kroner expected
Windfall tax means taxation (from 40 to 60 percent) on the extraordinary profits of energy producers. It will keep for the next three years, from 2023 to 2025, Czech finance minister said. Is expected to raise about 125 billion kronor, with which he would be able to cover most of the expenses for the energy price cap measure in the coming year. This applies if electricity and gas prices remain stable. If they increase, the state will have to subsidize suppliers further by the difference between the highest purchase price and the ceiling price. According to former Minister of Industry and Trade Karel Havlíček, this is the obstacle of state energy subsidies, putting the government in an uncertain situation for the state budget. Despite the state budget’s high spending on energy assistance, no tax increase for citizens is planned, specified Kupka (Minister of Transport), adding that “this tax is only extraordinary for energy companies.”
The Windfall tax will be applied to the share of profit exceeding the average in the years 2018 – 2021 of companies operating in the energy production and trade, banking, mining, oil and fossil fuel sectors. The tax will only affect large banks with interest income exceeding six billion kroner and energy companies with income exceeding two billion kroner. “If it were not for Putin’s aggression in Ukraine and its mainly energy impacts, we would not be talking about extraordinary taxes today. But the war generates new expenditures of tens, maybe even hundreds of billions of kronor, and these cannot just go to the state budget deficit. And alongside that, we have areas of the economy, such as energy, banking or oil, that generate high excess profits not because of innovation or providing better services to customers, but because of external factors. For example, because of rapidly rising interest rates or energy and energy commodity prices,” says Finance Minister Zbyněk Stanjura.
There is no shortage of criticism. According to opposition party vice-president Karel Havlíček, the most effective way to limit the costs of the energy crisis is to determine the price directly to producers according to sources, thus reducing their profits. As for taxing banks, they fear that banks will pass it on to small and medium-sized businesses. The Czech Banking Association argues that the new tax is not systematic and will not be efficient. “Banks should be partners with the government in a time of economic slowdown. Weakening them in this way is a big mistake,” said CBA Executive Director Monika Zahálková and proposed, instead of the tax on extraordinary profits, support for housing, financing of the state transport infrastructure fund, assistance in covering financial obligations, investment in state digitization, and cooperation with the National Development Bank. Critical was also Sev.en, which operates mines and lignite power plants, arguing that the tax penalizes cheaper sources of energy, such as lignite.
Sources: https://www.seznamzpravy.cz/ ; https://www.mfcr.cz/ ; https://ct24.ceskatelevize.cz/ ; https://www.camic.cz/
Source of images: https://currentaffairs.adda247.com/ ; https://storyset.com/
