energy crisisA cap on electricity prices and a tax on excess profits, is this only possible at European level? Think again. Last July, Greece introduced a similar crisis measure as well as an extraordinary 90% tax on excess profits. According to European tax law expert Paul Verhaeghe, the same could be done in Belgium. “What are we waiting for? It’s a mystery to me”, he explains in Het Laatste Nieuws.
Writing
15-09-22, 12:52
Last update:
15:17
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For several months, political leaders have been struggling to find out how to tackle excessive energy prices and the resulting superprofits for electricity producers.
With regard to price caps and the taxation of excess profits, many European countries often invoke legal obstacles or the need for a European approach, which would discourage Member States from acting alone. And even if the President of the European Commission, Ursula von der Leyen, has announced the creation of a European tax on excess profits, the concrete impact in practice remains to be demonstrated. And yet, it is possible to act alone without waiting for an agreement from the 27, according to Paul Verhaeghe, lawyer at the Brussels office specializing in “Wanted Law Taxe”. He cites as an example… Greece.
Last spring, Greek Prime Minister Kyriakos Mitsotakis announced that the country was going to cap the price of electricity and tax the surplus profits of electricity producers. “Greece will not wait for the solution from Europe, which is taking too long. The difficulties of households and businesses cannot wait any longer”. At the end of May, the country received the green light from the European Commission, and since July, the measures have been effective.
An extraordinary tax of 90% on excess profits
Concretely, Greece determines for each production technology – nuclear, renewable, gas, etc. – the profit margin that a power plant can achieve beyond the fixed production cost. The scheme sets a cap of 30% profit margin on electricity generation costs in effect before 1 September 2021. Profits that exceed this margin must be taxed as a “solidarity dividend” at a rate by 90%. The taxes collected are used to help families whose annual income is less than 45,000 euros by granting them a bonus on their electricity bill.
“In this way, Greece kills two birds with one stone,” says Verhaeghe. “On the one hand, the price of electricity at origin decreases for households and businesses, at no cost to the government. On the other hand, it brings in additional taxes to support businesses and households”.
The figures show that the measure is effective. In July – the first month the profit tax was in effect – inflation in Greece immediately fell by 1.6%, the biggest drop in Europe. In addition, electricity prices for consumers have fallen back to one of the lowest levels in Europe, according to figures from the Financial Times. For example, an average Greek family paid around 24 cents per kWh in August. In comparison, in Belgium, it was 62 euro cents per kWh, almost triple.
Could such a measure be introduced here too? It is quite possible, according to the expert. “We must of course ensure that the energy production remains sufficient. This is why I suggest setting a maximum profit margin of 50% on the real cost of producing each technology here in Belgium. With this, each plant still makes a nice profit and continues to be encouraged to produce. We must also ensure that power plants do not artificially inflate their cost of production”.
“It’s a mystery to me what Belgium is waiting for”
Paul Verhaeghe sweeps aside a possible objection from the European Union. “Europe provides for the possibility of temporary exceptional measures serving the general and economic interest. Greece proves that it is possible. Why has the Belgian government not yet taken this step? Ask the relevant ministers. It’s a mystery to me what we’re waiting for. In any case, I don’t see why we wouldn’t do it in Belgium now. In my opinion, this is an extremely effective crisis measure that can be introduced immediately to get through the winter”.
This is also what the ACV, the Flemish Christian trade union, demands. Like Verhaeghe, Ive Rosseel, tax adviser at the ACV study center, defends the Greek approach. “It’s midnight minus one for the purchasing power of citizens,” he warns. “People don’t know how to pay their bills anymore. It is urgent to take action. If Europe continues to dither, we must act at national level. And for that, this proposal is very effective”.
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