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Why France is reluctant to overtax the profits of tankers like the UK

Why France is reluctant to overtax the profits of tankers like the UK

Boris Johnson has just made a breathtaking turnaround. His government has just announced the introduction of an exceptional tax on the profits of large oil and gas groups, this Thursday, May 26. “The oil and gas sector is making extraordinary profits not as a result of recent changes in risk taking, innovation or efficiency, but as a result of soaring global commodity prices due in part to the Russian war »declared Rishi Sunak, the Minister of Finance in the House of Commons, to justify this new tax which goes against the policy of reducing taxes, usually advocated by the Conservative Party.

Weakened by Partygate – the scandal of the parties held in Downing Street during the first confinement – ​​the Conservative party gives in to the demands of Labor and the Liberal Democrats. The measure should bring in nearly 6 billion euros. It will be used to finance a new aid package for the most modest households. Energy giants will have to pay 25% more tax on their colossal profits. In exchange, they will be able to benefit from a tax credit for their investments.

surreal profits

Taking advantage of the surge in oil prices, the British company BP doubled its profits in the first quarter, when those of the Anglo-Dutch group Shell tripled, reaching 9 billion euros. At the same time, inflation is galloping in the United Kingdom: 9% in one year, unheard of since 1982. A context “apocalyptic”, according to the Governor of the Bank of England, which forced Boris Johnson to change gear. Its first aid plan, in February, was deemed largely insufficient.

READ ALSO: Rise in oil and gas: Engie and Total are doing well, the consumer… a little less

Before the United Kingdom, Italy had already taken the plunge, at the end of March. A 10% surcharge is applied on profits made between October 2021 and March 2022 by large companies in the energy sector. It was also the first decision of Viktor Orban, the Hungarian Prime Minister, since the entry into force of the state of emergency on May 24. “We ask and expect those who have made additional profits […] that they help the people and contribute to the national defense budget”said Orban, without going into the details of the expected revenue.

France is reluctant

Quite exceptionally, it was the European Commission that gave the green light to these surcharges. The International Energy Agency also recommends these additional taxes, noting that “Current market conditions could lead to excess profits of up to €200 billion in the EU for gas, coal, nuclear and hydro and other renewables in 2022”.

But for the time being, the French government is reluctant to tap into this windfall, in line with its tax reduction strategy. An exceptional contribution had however been put in place during the health crisis, by deducting complementary health insurance to finance Social Security. “Taxing superprofits is not an option chosen”estimated Gabriel Attal, the government spokesperson, in March. “Our objective is also to maintain the attractiveness regained by our country”he continued, considering that the policy led by Emmanuel Macron has enabled France to become “the most attractive country in Europe for foreign investment”.

READ ALSO: Big manipulation: this price increase that is hidden from us

This Friday, May 27 on France info, the former Minister of Ecological Transition nevertheless explained that this surcharge “was part of the scenarios” on which the government worked to prepare the next purchasing power support law, without specifying whether this option was preferred. However, the State seems reluctant to puncture the oil and gas groups, for fear that they will divert their investments from the energy transition. So far the government has mainly acted on EDF, by freezing regulated tariffs and asking it to sell more electricity at low cost to its competitors. Measures that have greatly reduced EDF’s profits.

5 billion in profits for Total in three months

The State is also pleased to have obtained a very small gesture from TotalEnergies: a rebate of 10 cents at the pump. A “solidarity action”, in the words of Total, which cost him 100 million euros. The oil and gas group made 5 billion euros in profits in the first three months of the year, after a record year of 16 billion in 2021. Proof that the French multinational has absorbed its losses in 2020, half of its profit was distributed to shareholders last year. In the meantime, the French are paying a high price for the rise in the price of oil.

READ ALSO: Rise in oil and gas: Engie and Total are doing well, the consumer… a little less

The profits of Engie (formerly GDF-Suez) also fuel the debate. The French energy company, whose majority shareholder is the state, posted a profit of 3.5 billion in the first quarter, driven by the volatility of gas prices. To avoid going to the checkout, Engie strives to show signs of goodwill. The group explains that it must advance the freezing of gas prices, which will then be borne by the State, and specifies that it needs cash to invest in renewable energies. While waiting for a new law to support purchasing power, which should come after the legislative elections, the British neo-liberals are teaching France a lesson.