A suggestion by the Eurogroup Chairman and Luxembourg Prime Minister to tax the unexpected profits oil companies make from surging oil prices has found modest support at a meeting of EU finance ministers.
EU finance ministers closed a two-day meeting on Friday (5 May) with a discussion on whether to impose a windfall tax on record profits by big oil companies.
Such a proposal would stand little chance of getting through since unanimity is required on tax matters. But the fact that finance ministers debated it does reflect a rising level of concern among EU ministers as consumers see prices at the pump surge.
According to Bloomberg, oil prices jumped by 43% in the past year with the world’s five largest companies pocketing a record $29 billion in the first quarter of 2006.
“There seems to be a certain level of irritation in the public opinion,” with the record profits made by big oil companies, Juncker told reporters at a news conference. But “we are only at the start of our reflections,” he tempered.
Austrian finance minister Karl-Heinz Grasser, who currently chairs the EU’s economic and finance ministers’ Council meetings, said the idea was “worth reflecting upon”. But he added that “this should be done on a global scale” and without distorting competition between the US, the EU and Asia. France did not exclude the idea either but others such as the Netherlands and Greece are strongly opposed, according to newswire reports.
The windfall profits in the oil sector mirrors that of utilities in the electricity sector which have benefited from the EU’s CO2 market launched a year ago. WWF recently calculated that German utilities were set to make windfall profits of between to €31 and €64 billion until end 2012 due to free carbon allocations.