Government considers windfall tax

Portugal’s newly appointed Minister of the Economy and Sea has not ruled out charging an additional windfall tax on energy companies.

António Costa Silva said last week that the government might tax the exceptional profits of energy companies which are raking in more money because of spiralling energy costs and increased demand.
The measure has already been admitted by the European Commission in its plan to control energy prices and energy dependence on Russia.
Windfall tax would be a one-off tax imposed by the government on Portuguese or non-Portuguese energy companies producing electricity, petroleum and gas which would target them if they are benefiting from something they are not responsible for. In this case rising energy costs caused by the pandemic and the war in Ukraine.
Companies that get oil and gas out of the ground are getting much more money for it than they were last year, largely because there has been so much more demand as the world emerges from the pandemic.
There are some critics, however, which argue that a windfall tax on energy companies would stop companies investing and that some pension funds benefit from the profits of large oil companies.
The minister admitted on Friday in the Portuguese parliament that the government could follow the recommendations of the European Commission and Organisation for Economic Cooperation and Development (OECD) to tax windfall energy profits.
“On the question of taxes, particularly on windfall profits that companies get, we should not demonise companies. What we will do is speak to them and probably consider a windfall tax on unexpected profits that they are getting by chance”, said António Costa Silva who had been the government’s key advisor on using €16Bn of EU bazooka funding to modernise and digitalise Portugal’s economy.
The energy sector will now have to await for the revised State Budget 2022 proposal which will be delivered to parliament today to see if windfall taxes will be introduced or the status quo will be maintained.