Windfall Profit Taxation in Europe (and Beyond)

Marco Greggi () and Anna Miotto
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Marco Greggi: Department of Law, University of Ferrara, 44121 Ferrara, Italy
Anna Miotto: Department of Law, University of Bergamo, 24121 Bergamo, Italy

Laws, 2023, vol. 13, issue 1, 1-14

Abstract: In 2022, the European Commission introduced, for the first time in its history, a windfall profit tax to be applied on “excessive” profits realized by qualified businesses operating in the “Oil and Gas” sector. Immediately after its implementation, questions arose as to its sustainability and its consistency with constitutional principles of the different member states regulating the domestic power to tax. To assess the consistency with the aforesaid rules, the article samples two countries, inside and outside the EU (Italy and Australia, respectively), and the historical precedents of the matter. Italy has been chosen due to the particularly stringent set of principles regulating the power of the legislature to tax, and Australia has been chosen because of the long-standing experience with superprofit taxes. In most of the scenarios analyzed, one common feature emerged: the complexity in defining the “Extra” nature of the profits and, consequently, the uncertainties in the calculation of the taxable base. In the case of Italy, for instance, the legislator had to intervene in several different moments to fine-tune the taxable base and restore certainty to the tax system. As a conclusion, while the taxation of extra profits should not per se be disregarded, its implementation demands a more robust and precise legal framework together with the understanding that the introduction of such a levy would be a one-way journey for the tax systems: windfall profits taxes would be here to stay.

Keywords: windfall profit tax; excessive profit tax; EU law; ability to pay; income taxation; tax policy; European recovery plan; EU tax policy (search for similar items in EconPapers)
JEL-codes: D78 E61 E62 F13 F42 F68 K0 K1 K2 K3 K4 (search for similar items in EconPapers)
Date: 2023
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