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Italy plans to impose next year a one-off windfall tax of 50% on the extra income energy firms have booked as a result of the rise in oil and gas prices, according to a draft budget bill Reuters saw on Monday.
The windfall tax is different from what the government released as plans for a rise in the levy on extra profits just last week.
In the $36.6-billion (35 billion euros) budget law the government approved early on Tuesday last week, Italy planned to raise the tax on the extra profits of the firms selling energy to 35% from 25% through the middle of 2023. Next year, the tax rate on energy firms will be calculated differently and will be based on the additional net profits the companies declare, not on sales.
In the latest version of the windfall tax plan seen by Reuters, the tax is 50% of the part of 2022 income which is at least 10% higher than the average income reported between 2018 and 2021.
Whatever the final tax on energy firms will be, it is clear that Italy will be raising the taxation on producers and sellers of energy that have benefitted from the increase in energy prices over the past year.
The budget, the first for Italy’s new government led by Giorgia Meloni, looks to impose higher windfall taxes on energy days after the UK also raised its taxes on oil and gas producers operating in the North Sea and expanded the windfall tax to include low-cost electricity generators.
Earlier this month, UK Chancellor of the Exchequer, Jeremy Hunt, said in the Autumn Statement that the UK is raising the Energy Profits Levy by 10 percentage points to 35% from January 1, 2023, and is extending it to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%. The government is also introducing a new temporary 45% Electricity Generator Levy that will be applied to the extraordinary returns being made by electricity generators. The levy will be applied to groups generating electricity from nuclear, renewable, and biomass sources “who are benefitting from a significant increase in the price received for their output without a corresponding increase in the costs of generation.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.