A Modern Excess Profit Tax

Manon François (), Carlos Oliveira, Bluebery Planterose () and Gabriel Zucman ()
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Manon François: EU Tax Observatory and Paris School of Economics
Carlos Oliveira: EU Tax Observatory and Nova School of Business and Economics
Bluebery Planterose: EU Tax Observatory
Gabriel Zucman: UC Berkeley and EU Tax Observatory

No 5, Working Papers from EU Tax Observatory

Abstract: This paper presents a new way to tax excess profits. We propose to tax the rise in the stock market capitalization of companies that benefit from extraordinary circumstances, such as energy firms following the invasion of Ukraine in February 2022. Targeting the rise in stock market capitalization (which is easily observable) makes the tax much harder to avoid than standard excess profit taxes, and allows to capture rents irrespective of where multinational companies book their profits. We apply this proposal to energy companies that are headquartered or have sales in the European Union. We estimate that taxing the January 2022 to September 2022 valuation gains of energy firms at a rate of 33% would generate around AC80 billion in revenue (0.4% of GDP) for the European Union. We discuss implementation practicalities and compare our proposals to other plans made to tax excess profits.

Keywords: Excess Profits Tax; Windfall Taxation; Stock Market Capitalization; Energy Sector Profits; Tax Avoidance; European Union Fiscal Policy (search for similar items in EconPapers)
JEL-codes: G32 H25 H26 Q48 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2022-09
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