Faced with the explosion of profits made by some large groups and the decline in the purchasing power of the French, part of the political class defends a tax on this extraordinary income, especially already in the energy sector.
Should we tax the big companies like TotalEnergies that implement big profit in this time of crisis? The question has come up in recent weeks, especially in the National Assembly. While Parliament rejected a proposal for a super-profits tax in August, during discussions on the 2022 amendment to the finance bill, Prime Minister Elisabeth Borne said she would not. “close the door” of this tax demanded by the left and the RN. Meanwhile the Minister of Economy, Bruno Le Maire, claims not to understand what it is. “I don’t know what it is”, he admitted in front of the bosses, this week. Franceinfo brings its added value to the debate on five questions.
1What are we talking about?
The notion of super-profit, which is not defined in economics at all, refers to the large profits made by companies. The expression arose in the public and political debate on the war in Ukraine and the very significant profits of large oil and energy groups such as TotalEnergies or Engie. “This term refers to an extraordinary increase in income in a sector of activity after an exogenous crisis, explained the economist Anne-Sophie Alsif. We are talking about the windfall effect. “
it the profit is thus made due to a situation independent of the companies: the war and the inflationary context. TotalEnergies announced at the end of July a profit of 5.6 billion euros in the second quarter of 2022, a boom of 159% in a year, thanks to the increase in oil and gas prices. Qparallel, lRising energy prices plunge millions of households into vulnerability and make States spend more.
2How does this tax happen?
We must first create a legal framework, because super-profit is a new concept. Deputies and senators thus rejected both tax changes “wind gain” large groups. “A sector must be defined, and tax criteria must be imposed in relation to the turnover or the number of employees, for example”, explained economist Anne-Sophie Alsif. The profit from this tax is still difficult to assess. “It depends on where you put the cursor, because there is no defined perimeter.”
>> Why did Total’s huge profits make people cringe?
3Which companies will be affected?
This tax is actually related to some oil and energy groups, especially TotalEnergies, Engie or the ship owner CMA-CGM. In the Senate, the socialist group tabled an amendment to tax the super-profits of major gas and oil companies as well as maritime and motorway concessions.
Faced with the specter of the special tax, the CMA-CGM and TotalEnergies groups have already announced rebates to their customers at the end of July. The ship owner promised to reduce its freight of 750 euros per 40 foot container to France and abroad. TotalEnergies guarantees a discount at the pump of 20 cents per liter between September and November at all its service stations, then 10 cents per liter from November 1 to December 31.
4What did the government and opposition say?
The executive is generally not in favor of such a tax. Elisabeth Borne, who explained in an interview with Parisian not “close the door” to this extent, it is argued that it is complicated to know who makes super-profits. “I don’t know what a super-profit is”, decided for his part the Minister of the Economy, Bruno Le Maire. He said, “Total, CMA-CGM, Distributor, several other companies have already made efforts to distribute their income directly into the consumer’s pocket”.
>> Purchasing power: we summarize for you the debates on the taxation of super-profits of large companies
On the left, La France insoumise and the PS are in favor of a shared initiative referendum on the subject. In July, taxing the super-profits of large groups was a key proposal in the counter-project “Aim to respond to social emergency” worn by Nupes. The left alliance pleaded for the establishment in 2022 and 2023 of a “extraordinary tax of 25% on super-profits of oil and gas companies, shipping companies and highway concessionaires”. National Rally also defended the tax on super-profits.
5Which countries have already implemented this tax?
The UK, Italy and Spain have passed legislation to tax the profits of energy companies profiting from the crisis. The British introduced a temporary tax of 25% on the profits of oil and gas giants, such as BP, after weeks of negotiations. This tax should make it possible to finance a third of the new social measures, bringing in almost 5 billion pounds a year.
In Spain, the head of the government, Pedro Sanchez, announced that extraordinary taxes will be imposed on energy and financial companies in 2023 and 2024. The government hopes to get about 3.5 billion euros per year for two years.
For its part, Italy revealed at the end of May its intention to raise the tax on super-profits to 25%, which corresponds to the rate implemented in the United Kingdom. At the end of March, the country introduced by a decree a 10% tax on the income of large energy companies – such as Enel or Eni – thanks to the increase in prices due to the war in Ukraine. Romania and Greece have also imposed measures affecting energy groups.