The party leader of the Social Democrats, Saskia Esken, is drumming for the introduction of the levy.
(Photo: IMAGO/Metodi Popov)
Berlin The federal government is planning new relief. But how are they supposed to be financed? SPD and Greens see the answer in renewing their demand for an excess profit tax. However, the FDP continued to slow down, to the annoyance of the coalition partners. “Further relief is needed, even the FDP says so,” says Hannes Walter (SPD), Vice-Chairman of the Economic Committee.
If the liberals want to comply with the debt brake at the same time, the money has to come from somewhere. “An excess profit tax is only logical. It’s simple math,” Walter told Handelsblatt.
From the point of view of Chancellor Olaf Scholz (SPD), an excess profit tax is “currently not planned”, as a government spokesman confirmed. But the leader of the Social Democrats, Saskia Esken, is also pushing for the introduction of the levy. “Many European partners have shown us how and successfully introduced an excess profit tax,” she told the “Augsburger Allgemeine”.
So far, the debate about an excess profit tax has focused primarily on the mineral oil companies.
Esken has now expanded its claim to include electricity producers. Many large electricity companies are currently earning above average “because they can sell their electricity mix at the currently highest market price,” she said. Most recently, RWE had increased its profit forecast by 1.5 billion euros. A majority of the Greens also support the proposal for an excess profit tax, including Vice Chancellor Robert Habeck.
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The rejection of the FDP is now supported by an expert opinion: The scientific advisory board at the Federal Ministry of Finance “strongly advises against introducing an excess profit tax”. The Advisory Board advises the House of Finance Minister and FDP leader Christian Lindner, who has long rejected an excess profit tax.
However, the board is independent. The plan to take a closer look at the idea of an excess profit tax was made at the beginning of the year, according to advisory board circles.
The Federal Minister of Finance rejects an excess profit tax.
(Photo: IMAGO/photothek)
The 32 economists find clear words. An excess profit tax leads to “arbitrary burdens and distortions”. Specifically, they criticize that the steering effect of higher profits would be overridden. The prospect of higher profits motivates entrepreneurs to become active in a specific market. “Taxing the above-average profits would prevent this diversion effect and permanently cement the shortages.” The report cites the production of face masks at the beginning of the corona pandemic as an example.
There are already excess profit taxes abroad
That is the economic justification. There is also a practical one, whereby there seems to be disagreement in the Advisory Board. “Some colleagues say that there are no accidental excess profits that have not somehow found their way into the entrepreneur’s expectations,” reports Wolfram Richter, a member of the Advisory Board and professor emeritus at the University of Dortmund. “Others, like me, think surprises are possible.”
Merely this differing view does not change the conclusion. “In practice, you won’t be able to separate expected and unexpected (excess) profits,” says Richter.
>>Read here: Debate about special tax: Should the state skim off the billions in profits from the oil companies?
Abroad, however, there are already excess profit taxes. Italy, for example, wants to collect between ten and eleven billion euros from a 25 percent excess profit tax for energy companies. Great Britain and Greece have also introduced similar instruments.
Introduction also possible in Germany
A report by the scientific service of the Bundestag suggests that an introduction in Germany would also be possible. The state would therefore have to demonstrate that the companies concerned had made “undeserved profits” and that they could be determined. “In view of the obvious current developments in the energy markets, this does not seem impossible,” the paper says.
An excess profit tax is required, among other things, for large energy companies.
(Photo: Reuters)
The economists on the Advisory Board at the Ministry of Finance do not consider the introduction of an excess profit tax to be fundamentally impossible. On the contrary, the unrealistic definition of excess profits would lead to a politicization of the design. “If you tried it, you would open the floodgates to untenable differentiations in tax law,” says Richter.
In Italy there are already problems with the first payment due. Many Italian energy companies have apparently refused to pay the excess profit tax due by the end of June, the Reuters news agency reported on Tuesday. The government was missing revenue of more than nine billion euros.
More: Eight reasons why an excess profit tax is not a good idea