A parliamentary inquiry has revealed that Germany’s “excess profit tax” levied on the windfall gains of major energy corporations following Russia’s invasion of Ukraine, has generated significantly more revenue than initially projected. The findings, contained in a letter from the Federal Ministry of Finance and obtained by Green Party parliamentarian Katharina Beck, demonstrate the tax’s unexpected capacity to bolster state coffers amidst ongoing economic uncertainty.
Data released indicates that 13 companies were subject to the special levy in both 2022 and 2023. In 2022, these companies reported a combined tax payment of €1.983 billion, followed by €465 million in 2023. Notably, the tax collection was temporarily suspended for two companies, totaling €160 million and €106 million respectively, highlighting potential complexities and ongoing scrutiny of the tax’s implementation. The initial legislative expectation was an aggregate revenue of just over €1 billion, underscoring the significant overshoot.
“The EU energy crisis contribution allowed us to capture nearly €2.5 billion of excess profits in the oil and gas sector, undeniably achieved around Russia’s war of aggression on Ukraine” stated Beck, the Green Party’s spokesperson for financial policy. “This is an important success and demonstrates: The instrument of the excess profit tax can make a fair contribution in exceptional market phases.
However, the revenue gains have reignited a politically charged debate in Berlin, now shifting the focus to the burgeoning defense industry. With Germany and Europe significantly increasing defense spending, arms manufacturers are benefiting from a surge in orders, but also facing rising production costs due to limited competition and high demand. The possibility of applying a similar excess profit tax model to this sector is now being seriously considered, a move that would represent a significant expansion of the government’s interventionist approach to market regulation.
The original windfall tax specifically targeted oil, gas, coal and refining companies, capitalising on the surge in energy prices triggered by the Russian invasion. These companies were obligated to pay an additional 33% tax on “excess earnings” exceeding two-fifths of their average performance in preceding years. Officially referred to as the “EU energy crisis contribution” the designation was a strategic maneuver designed to disguise the politically sensitive nature of what former Finance Minister Christian Lindner (of the Free Democratic Party) vehemently opposed as a “windfall tax”. The renewed discussion over its potential application to the arms industry signals a deepening re-evaluation of Germany’s economic policy and a willingness to explore more aggressive taxation strategies in times of geopolitical and economic crisis.
