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EU Set To Back Windfall Tax On Energy Firms

The European Union's heads of government are likely to back later this week a proposal to consider levying a temporary windfall tax on some energy companies as oil and gas prices soar, Bloomberg reported on Tuesday, citing a draft political statement it had seen.

The EU leaders are holding meetings all week to decide how to intensify sanctions against Russia over its invasion of Ukraine, as well as how to mitigate the impact of skyrocketing energy prices on EU households.

"As proposed by the commission, temporary taxation of windfall profits can be a useful source of financing," the EU leaders are expected to say in a statement later this week. This statement, however, could change before being adopted, Bloomberg notes.  

The windfall tax on EU level is yet another proposal from policymakers to have oil and gas companies pay more taxes as they earn large profits from the surge in energy prices. Several politicians in the UK and the U.S. have already called for windfall taxes on energy firms.

In the UK, the opposition Labour Party in the UK and Greenpeace proposed last month such a tax.

"These profits are a slap in the face to the millions of people dreading their next energy bill. BP and Shell are raking in billions from the gas price crisis while enjoying one of the most favorable tax regimes in the world for offshore drillers. And these are the same companies responsible for pushing our world closer to catastrophic climate change. This isn't right," Greenpeace UK's head of climate Kate Blagojevic said in early February, before the most recent rally of energy prices following Russia's invasion of Ukraine.

In the United States, Senator Elizabeth Warren has also proposed a windfall profit tax on oil companies.

"Big Oil's first priority is to maximize profits," Warren said in a Tweet earlier this month. "We can't let them use Putin's invasion as an excuse to pad their bottom line with war-fueled profits."

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By Tsvetana Paraskova for Oilprice.com

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