The Austrian government is looking to lower the threshold for a windfall tax it imposed on oil and gas companies last year.
That’s according to a new Bloomberg report, which noted that until now the threshold for the windfall tax, which covers 40% of above-threshold profits, was set at 20% above the average profit level for the period 2018 to 2021.
The new threshold under discussion would be 10% above the companies’ average profit level for 2018 to 2021.
“It’s not acceptable that energy companies profit from the crisis when clients are bombarded with horrendous bills,” Austria’s Chancellor, Karl Nehammer, said.
Windfall profit taxes became a tool for European governments to mitigate the impact of the energy crunch on households, businesses and their own finances.
As gas prices soared in the wake of Russia’s invasion of Ukraine and the European sanction response, and oil prices followed, the companies producing and selling these commodities saw their profits soar along with prices.
In the middle of an energy transition away from oil and gas, this could not sit well with governments, so they were quick to point the finger at the oil and gas industry and oblige them to pay more into state coffers.
Companies warned this could interfere with their investment plans for future production but the governments did not relent and windfall profits were introduced across Europe last year.
In the UK, the warnings have already turned into action, with some North Sea operators revising their investment plans for the region after the government introduced a 35% additional levy on the industry.
According to Aramco’s CEO, Amin Nasser, these windfall profit taxes would also interfere with decarbonization efforts in the oil and gas industry.
“Decarbonizing existing resources also costs a lot of money,” Nasser said in January. “So we need to see the support from the policymakers and from the capital markets at the same time. Capital markets [are] putting a lot of pressure also on these companies, where it makes it too difficult for them to make some of these investments and get the right funding and capital.”
