Energy Crisis

Croatia, Slovenia to introduce windfall tax

windfall profit tax slovenia croatia energy crisis

Photo: Bruno /Germany from Pixabay

Published

November 23, 2022

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Published:

November 23, 2022

Country:

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Comments:

0

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Slovenia and Croatia have decided to introduce a windfall tax to subsidize renewables and help the population and businesses cope with the energy and economic crisis. Slovenia will impose the extra levy on energy companies only, while Croatia intends to tax all firms.

A windfall tax has already been introduced by numerous countries throughout Europe in order to, above all, finance generous subsidies paid to citizens and firms due to high energy prices.

Following in the footsteps of other European countries, Slovenia’s government has unveiled a draft law envisaging a windfall tax on energy companies in 2022 and 2023, while Croatia has launched a public consultation on an extra tax bill applying only to 2022.

Any income above EUR 180 per MWh is to be paid to the state budget

Slovenia, as reported by Euractiv, has decided that any income above EUR 180 per megawatt-hour (MWh) of electricity, produced in Slovenia and sold on the wholesale market, must be paid to the state budget.

Exemptions are envisaged for energy producers with production costs higher than EUR 180 per MWh, as well as for energy generation from natural gas and in small facilities with a peak capacity below 500 kW.

Most companies that will be taxed are owned by the state

The tax will also be paid by oil and gas companies. It will be calculated by multiplying the difference between the profit in 2022 or 2023 and the average profit in the period 2018-2021 by a factor of 1.2.

The government plans to use the windfall tax revenues to subsidize renewable energy sources and finance measures to reduce demand for electricity during peak hours.

Of note, a majority of energy companies in Slovenia are fully or partially owned by the state, so the government will in effect be taxing itself. At the end of September, Slovenian Prime Minister Robert Golob said the fight against the energy crisis next year will cost the country EUR 5 billion.

Croatian government: redirecting profits from those who have a lot to those who have less

windfall profit tax croatia minister primorac
Minister of Finance Marko Primorac (photo: Government of Croatia)

The Croatian government has gone ahead with a plan announced in early September, proposing a bill that would introduce a windfall profit tax.

Prime Minister Andrej Plenković has said the new tax is essentially a “contribution to solidarity.” This is a crisis that requires those who have more to help those who have less, he said.

The tax is a joint contribution to a fairer distribution of the burden of the crisis that affects everyone in society. Its purpose, in his words, is not to punish those who are successful, but to redirect windfall gains from those who have a lot to those who have less.

Minister Primorac:  a 100% profit growth will be taxed at a rate of 30%

Finance Minister Marko Primorac said the new tax will be paid by companies with 2022 revenues exceeding HRK 300 million (EUR 40 million) at a rate of 33%, but only on a profit increase higher than 20% compared to the four-year average in the period 2018-2021.

The tax revenues will be used to help citizens, said Primoras, adding that about HRK 2 billion (EUR 265 million) could be collected in this way.

According to initial analyses, the tax should affect the processing industry, the oil and gas industry, the trade and construction sectors, as well as the financial sector.

If someone’s profit in 2022 increases by 50% compared to the four-year average, their effective rate of profit tax will be 24%, stressed Primorac. If someone’s profit jumps by 100%, the rate will be about 30%, he added.

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