Special levy: How Italy wants to redistribute extra profits from energy companies

Special levy: How Italy wants to redistribute extra profits from energy companies
Written by insideindyhomes

As of: 6/6/2022 5:21 p.m

While German politicians are discussing a special levy for “crisis winners,” Italy reacted as early as March: Extra profits from energy companies are taxed additionally. But there is criticism of the calculation.

By Elisabeth Pongratz, ARD Studio Rome

The economist Lilia Cavallari has her office in the middle of the old town of Rome, near the Pantheon. She is the President of upb, the Parliamentary Office for Budgetary Affairs. Their job is to analyze and control government finances. She thinks the special levy on extra profits from energy companies is a good compromise because it meets different needs.

The need to find an immediate revenue stream that already generates revenue in the current year and has a redistributive function. So that funds are redistributed between those companies that have benefited most from the price increase and those that have been particularly hurt by the price increase.

Elizabeth Pongratz
ARD studio Rome

The prices for natural gas and oil have risen since last year, and then to dramatic heights as a result of the Ukraine war. The Italian government did not want to stand idly by. As early as March 18, Prime Minister Mario Draghi announced: “We are taxing some of the extraordinary profits that manufacturers are making as a result of rising raw material costs, and distributing this money to companies and households that are obviously in great difficulty.”

criticism of the calculation

The government initially set the special levy at ten percent, a few weeks later it was 25 percent. The billions raised will be used to finance various simplifications: the consumption tax on diesel and petrol has been reduced by 25 cents per liter, there are tax credits for energy-intensive companies, and electricity bills can be paid in longer installments. Italy also grants a bonus of 200 euros if an employee, a self-employed person or a pensioner has very little income.

The energy companies have to pay a special fee for those whose sales have increased by more than 10 percent and are over five million euros. Professor Cavallari sees a problem when calculating the amount of the fee:

For example, the assessment basis refers to a specific reference period. The decisive factor is the change in the seven months from October 2021 to April 2022 compared to the seven months of previous years. But it was precisely during this period that the pandemic was fully unfolding, so that company sales were particularly low. Because many companies were closed.

Around 11,000 companies are active in the energy sector in Italy, but she estimates that the levy could only affect around 400. Of course, this includes the giants of the industry, i.e. Enel, Eni and Edison.

Government hopes for eleven billion euros

The special contribution must be paid by the end of June, and eleven billion euros are to be flushed into the state coffers – at least that is the hope of the government. However, the forecasts may be too optimistic, the first voices warn.

Many in the energy industry agree that the intentions of additional taxation are justified. But it is unbalanced and unfair. On the one hand, sales are taxed, but not special profits. This leads to inequalities between companies in the same industry. On the other hand, there are no comparable sanctions in most other countries, even if the energy crisis is just as severe there as in Italy.

Special levy for extra profits of the energy companies

Elisabeth Pongratz, ARD Rome, 6.6.2022 4:15 p.m

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