why France supports a “European contribution” from energy operators rather than taxes

Tax or no tax? The debate about the super-profits of companies that profited from the war in Ukraine continues to rise. while parliament rejected the tax proposalin August, IThe German government reigned in the controversy on Sunday 4 September by announcing that it supports the European Commission’s proposal to introduce a compulsory contribution from companies in the energy sector.

A notification that does not exist failed to raise the French left, which called on the government to reverse its decision not to tax the recording of income linked to the war in Ukraine. Twenty-four hours later, Emmanuel Macron in turn assured that France supports the European proposal, which will be discussed at Twenty Seven on Friday in an Energy Council. This constitutes, according to him, the method “the most consistent, the most fair, the most effective”, while households face higher energy prices.

Tax on super profits vs “mechanism of cocontribution to Europe” : what is the difference between the two proposals? If the European solution is adopted, the effort is required to “energy operators whose production costs are lower than the market sales price”, by Emmanuel Macron. Since the invasion of Russia, energy companies “electricity generation based on [d’énergies] renewables, coal or nuclear” while they have “cost of production is still low” that before the war, recalled German Economy Minister Robert Habeck on Sunday.

Due to a complex mechanism (that the European Union wants to reform), the sale price of electricity is in line with gas. So when gas is expensive, as it is now, electricity is also expensive, despite the cost of production not changing… That saves these operators “a lot of money”, reprimanded by the German minister. So the European logic is to ask them to contribute to the support plans of the European States, under it “we shouldn’t be”detailed Emmanuel Macron. This contribution can to be able to sit “in turnover or the amount of production, for example. The contribution is therefore decorrelated from the profit: it is not tax based benefit” which is considered very important, explains Sophie Blégent-Delapille, tax lawyer and managing partner at Deloitte. A difference of logic in which the Minister of Economy, Bruno Le Maire, finds himself even more, who said again at the end of August: “I don’t know what a super-profit is.”

There is also a target difference. The mechanicEuropean ism will only concern energy operators, sor a smaller number of companies than the French socialist proposal, for example, which wants to tax more profits of large gas and oil companies as well as maritime and motorway concessions. “Then why stop there? The companies that sell helicopters and weapons also make a lot of money”commented Sophie Blégent-Delapille, who taught “lack of consistency”. However, a broad proposal is not to the taste of the government, which is reluctant on the principle of taxing business income too much. “Taxing France more means making less in France”justified by Bruno Le Maire, at the end of August. On the contrary, the European proposal has the advantage of standardizing practices, without harming the attractiveness of the country, which alone will introduce significant taxes, Bercy believes, putting forward the model of minimum taxes of 15% of the world’s multinationals, adopted by the end of 2021.

There is also a lack of suggestion on the left “possible”, according to the Ministry of the Economy, which argues that most of the profits of energy companies are located in the country where the hydrocarbons are produced (Algeria, Norway, Nigeria, etc.) and not in the consuming countries. Not to mention that this is the cause of the problem “Sharing this windfall: is it fair for us to take advantage of these benefits, if the producer countries also want them?”appreciated Sophie Blégent-Delapille.

Finally, the Ministry of the Economy recalls that if it supports the European proposal for the contribution from energy companies … it is because“We already do it for renewables”. In France, to encourage energy operators to start energy transition, renewable energies are supported by a system of additional payments between the market price and a fixed price. “target” set to provide each project. In short: the State pays the operators if the market price is lower than the price it guarantees. On the contrary, the latter donates money to the State when the market price exceeds the guaranteed price… This has been the case since the explosion of energy prices. This agreement could bring 8.6 billion euros to the State in 2022 and 2023, according toan Energy Regulation Commission.

In addition, and to prevent the increase of regulated electricity tariffs to 4% in 2022, the government this year forced EDF to increase 20% of the annual quota of electricity sold at a reduced price of its competitor, in the framework of the mechanism called “Regulated access to historical nuclear electricity” (Arenh). The group was forced to sell their production at a knockdown price, when electricity increased in wholesale markets. A mechanism different from the one proposed by the European Commission, but with the same “logic” contribution, assured Bercy.

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