The Czech Republic is the latest country to levy windfall taxes on energy companies to scrape together funds to continue subsidizing high energy costs, Bloomberg reported on Friday.
Czech lawmakers approved Finance Minister Zbynek Stanjura’s proposal for a 60% windfall tax on the country’s main energy companies. The windfall tax, which government leaders have referred to as a “surcharge” is set to span the next three years, and looks to strip oil and gas from a healthy portion of its extraordinary profits thanks to recent hikes in oil and gas prices.
Stanjura protested that he “took no joy” in levying the windfall tax—just the latest in a series of similar taxes assessed in other countries. “If circumstances allow, I will be the first to propose abolishing it,” the Finance Minister said on Friday.
Those circumstances would likely be oil and gas prices—and oil and gas company profits—coming down.
For the oil companies, it is a lose-lose scenario. If oil and gas prices fall, the tax may be relaxed or even removed—but their profits will fall in lockstep with price movements. If oil and gas prices stay high, the government will strip 60% of its profits from it. 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 that it will move its commodities trading business to another country to skirt the new tax.
The tax should send an extra $3.5 billion into government coffers next year, according to Finance Ministry 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.
