EU looking at oil and gas windfall profit tax, as energy prices soar

EU Mulls Windfall Profit Tax on Oil and Gas as Energy Prices Surge

EU Considers Windfall Tax Amid Soaring Energy Profits

By Kate Abnett

Background: Energy Price Surge and Profits

LUXEMBOURG, Oct 12 (Reuters) - The European Union is examining a bloc-wide windfall profit tax on oil and gas companies, the EU's tax chief told Reuters on Monday, as governments scramble for funds to help citizens with soaring energy bills.    

Oil and gas companies have reaped bumper profits this year, as energy prices have surged during the US-Israeli war with Iran, amid disruptions to shipping through the Strait of Hormuz and Iranian attacks on Gulf neighbours.

EU Commission's Response

Wopke Hoekstra, the European Commissioner responsible for climate and taxation, said the Commission was setting up a working group to examine the merits and drawbacks of a levy and assess whether such a measure would be viable.

Concerns Over Fairness and Social Impact

"Citizens, and particularly vulnerable citizens, are confronted with dramatic increases in their energy bills. And some companies are reaping truly excessive benefits without delivering any additional service or any additional products. They're reaping the benefits from the world being in turmoil," Hoekstra said in an interview.

"To many citizens and many politicians, that feels off... I think we all have sympathy for the underlying logic, regardless of where we exactly take the conversation," he said.

Market Trends and Member State Pressure

Benchmark Brent crude futures prices climbed to multi‑year highs near $120 a barrel in late April and remain more than 70% above their level at the start of the year, boosting profits for oil refiners and producers.

Germany, Spain, Portugal, Italy, Poland and Austria have urged the EU to examine a bloc-wide windfall profit tax.

Legal and Historical Context

Assessment of Legal Viability

Hoekstra said Brussels would carefully assess the legal status of any potential measure.

Previous Windfall Levies in the EU

The EU introduced a windfall profit levy on oil, gas, coal and refining companies in 2022 after Russia's full-scale invasion of Ukraine sent energy prices soaring. Legal challenges are still pending after companies including ExxonMobil argued the measure was unlawful. 

Ongoing Legal Challenges

"We're still litigating court cases from the decision in 2022 to do something similar," Hoekstra said. "So that is something that we need to take into account as well."

Details of the 2022 Levy

The 2022 scheme imposed a minimum 33% levy on surplus profits, defined as profits more than 20% above a company's average earnings in previous years. It raised nearly €29 billion ($32 billion), according to a Commission report.

National Windfall Levies

Some EU countries have already introduced national windfall levies. Portugal, for example, imposed a 33% tax on extraordinary profits earned in 2026 ​by oil and refining companies.

($1 = 0.8961 euros)

(Reporting by Kate Abnett. Editing by Mark Potter)