Faced with the explosion of profits made by certain large groups and the erosion of the purchasing power of the French, part of the political class defends a tax on these exceptional profits, in particular in the energy sector.
Should we tax large companies like TotalEnergies which carry out considerable profits in these times of crisis? The question has emerged in recent weeks, particularly in the National Assembly. While Parliament rejected a proposal for a tax on super-profits in August, during discussions on the 2022 amending finance bill, Prime Minister Elisabeth Borne said she did not “close the door” to this taxation demanded by the left and the RN. While the Minister of the Economy, Bruno Le Maire, claims not to understand what it is all about. “I do not know what it is”, he claimed in front of the employers, this week. Franceinfo brings its added value to the debate in five questions.
1What are we talking about ?
The notion of super-profits, which is not really defined in economics, refers to considerable profits that have been made by companies. The expression emerged in public and political debate with the war in Ukraine and the very significant profits of large oil and energy groups such as TotalEnergies or Engie. “This term designates an exceptional increase in profits in a sector of activity following an exogenous crisis, explains economist Anne-Sophie Alsif. We are talking about a windfall effect.”
These profits were thus made due to a situation independent of 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% over one year, thanks to the rise in oil and gas prices. Pparallel, lsoaring energy prices plunge millions of households into precariousness and make States spend considerable sums.
2How could this tax materialize?
We must first create a legal framework, since super-profits are a new concept. Deputies and senators thus rejected two amendments to tax “windfall profits” large groups. “A sector should be defined, and taxation criteria should be imposed in relation to turnover or the number of employees, for example”, explains economist Anne-Sophie Alsif. The gain from this tax is still difficult to assess. “It depends on where you put the cursor, since there is no defined perimeter.”
>> Why do Total’s gigantic profits make people cringe?
3Which companies would be affected?
This tax would in reality only concern a few oil and energy groups, in particular TotalEnergies, Engie or the shipowner CMA-CGM. In the Senate, the socialist group had tabled an amendment to tax the super-profits of large gas and oil companies as well as maritime and motorway concessions.
Faced with the specter of special taxation, the CMA-CGM and TotalEnergies groups have already announced rebates to their customers at the end of July. The shipowner promised to reduce its freight rates of 750 euros per 40-foot container to France and overseas. TotalEnergies has guaranteed 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 are the government and the opposition saying?
The executive is generally not in favor of such taxation. Elisabeth Borne, who explained in an interview with Parisian not “close the door” to this extent, argues that it is complicated to know who makes super-profits. “I don’t know what a super-profit is”, judged for his part the Minister of the Economy, Bruno Le Maire. According to him, “Total, CMA-CGM, distributors, a number of other companies have already made efforts to redistribute what they have earned directly into the consumer’s pocket”.
>> Purchasing power: we summarize for you the debates on the taxation of the 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, the taxation of the super-profits of large groups was a flagship proposal of the counter-project “aimed at responding to the social emergency” worn by Nupes. The left alliance pleads for the establishment in 2022 and 2023 of a “exceptional tax of 25% on the super-profits of oil and gas companies, shipping companies and highway concessionaires”. The National Rally also defends a 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 that profited from the crisis. The British have 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 around 5 billion pounds in one year.
In Spain, the head of government, Pedro Sanchez, has announced that exceptional taxes will be put in place on energy and financial companies in 2023 and 2024. The government hopes to garner some 3.5 billion euros per year over two years.
For its part, Italy revealed at the end of May its intention to raise its tax on super-profits to 25%, equaling the rate in force in the United Kingdom. At the end of March, the country had introduced by decree a 10% tax on the profits of large energy companies – such as Enel or Eni – made thanks to soaring prices due to the war in Ukraine. Romania and Greece have also imposed measures affecting energy groups.