TAOISEACH MICHEÁL MARTIN has said that the government will consider introducing a windfall tax on energy companies in the upcoming Budget.
It comes after there were renewed calls for an introduction of the tax on the companies’ soaring profits and for the funding to be used to ease the “difficulties” facing households.
A windfall tax is a one-off government tax on an unexpectedly large profit from a company.
Speaking to reporters in Kerry this afternoon, the Taoiseach said: “The Government will consider a range of issues and will give examination to the issue of windfall tax.
“In the context of State companies like the ESB, we already take a dividend from the ESB so that’s always open to the government to do that,” he said.
“On the other hand, we do want significant investment in renewables into the future, but that said, I think there are significant profits being made all around. We will examine that in the context of the Budget.”
Martin also said that there will be a separate cost-of-living package parallel to extra budget supports in September “to alleviate the pressures that are undoubtedly there on many households across the country”.
“We have a lot of challenges ahead, but I think the revenue figures do give us some opportunity and will give us an opportunity in the Budget and the cost-of-living package in September, to take pressure off people,” he said.
Energy companies have hiked prices for customers since the energy crisis sparked by Russia’s invasion of Ukraine, yet have experienced an increase in profits.
British oil giant BP’s net profit increased threefold in the second quarter of this year compared to the same period in 2021. Shell had a fivefold surge in net profit in this time.
Last week, it was announced that Bord Gáis Energy’s operating profits rose by 74% in the first half of this year.
‘Immoral’
Yesterday evening the UN chief accused oil and gas companies of making “excessive” profits from this crisis.
“It is immoral for oil and gas companies to be making record profits from this energy crisis on the backs of the poorest people and communities and at a massive cost to the climate,” Antonio Guterres said.
He urged governments to tax these profits and use the funds to “support the most vulnerable people through these difficult times”.
Colette Bennett from Social Justice Ireland said the organisation supports a windfall tax on energy companies.
The think tank is also in favour of an energy price cap “so that those taxes aren’t being passed on to customers”.
They want to see the tax money used for retrofitting and supports for low-income households.
Bennett told RTÉ radio’s Morning Ireland that there should be more focus on this rather than one-off measures like the €200 energy credit announced earlier this year to reduce the cost of consumer bills.
“That’s fine, that’s very welcome for the bill that exists today. But in two months’ time, what happens then? These families are being left in the same position,” she said.
“This windfall tax would be an additional supplement” to be ringfenced for energy efficient measures and to ensure a just transition,” Bennett added.
People Before Profit TD Richard Boyd Barrett said it is “absolutely obscene” that energy companies are seeing “another staggering increase in profits” while customers are being “hammered with spiraling” costs.
“Yet government refuses to cap energy prices or cap their profits with a windfall tax,” the TD said on Twitter last week.
Sinn Féin finance spokesperson Pearse Doherty also again called on the government to introduce a windfall tax on energy companies.
‘Unacceptable’
In a statement yesterday, the TD said: “We will soon be heading into the autumn and winter period when households will this year feel the pinch even more than ever before.
We all know the war in Ukraine is driving up the price of fuel on top of the energy spike in the wholesale market last year.
“But it is simply unacceptable that shareholders are profiting from these difficulties when households are facing having to make the choice between heating their home or putting food on the table.”
Environmental group Friends of the Earth had last month called on the government to bring in a windfall tax on energy companies that saw increased profits during the energy crisis.
The burning of fossil fuels like oil and gas is the main cause of climate change.
In response to a parliamentary question from Doherty last week, Finance Minister Paschal Donohoe said the government’s National Energy Security Framework contains a commitment to work with the EU to consider proposals under the bloc’s plan to reduce dependence on Russian fossil fuels.
This plan acknowledged that taxation or regulatory measures “aimed at removing gains created by the current crisis situation could be considered”, the minister said.
He said there is work ongoing to consider any appropriate actions in the energy crisis, including the “potential negative impacts of any such action”.
“For example, there is a risk that a windfall tax may lead to higher consumer costs and negatively impact upon investment in the energy sector, particularly in the area of renewables,” the minister said.
Doherty said that profits of energy companies are generally taxed in line with the 12.5% corporation tax rate.
The minister said he was advised by Revenue that the additional yield of increasing the corporation tax rate from 12.5% to 20%, as one example, on the taxable profits of all energy providers would bring in an additional €54 million each year.
A 25% increase would bring in an additional €90 million and a 30% rate would bring in €126 million.
Donohoe added that the estimates don’t account for any “potential change in behaviour by the entities concerned in response to changes in the tax rate”.
Additional reporting from Jane Moore
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