Czech windfall tax to generate huge funds – from next year
Czech MPs debated a windfall tax on profits in the energy and banking sectors in the lower house on Tuesday. The government plans to generate tens of billions from the tax from next year, not retroactively for 2022, as some voices in the coalition had demanded.
Earlier this month the Czech government raised the idea of applying a windfall tax on profits in the energy and banking sectors.
It aims to generate around CZK 85 billion next year alone by placing a 60-percent tax on what are called excess profits in the years 2023 to 2025.
The move is aimed at cushioning Czech households and businesses from high energy prices mainly sparked by Russia’s invasion of Ukraine.
The windfall tax is intended to help cover protective moves, such as a cap on electricity prices.
Last week there were suggestions from some junior members in the five-party government that such a tax could be imposed retroactively, for 2022.
This unsettled traders and saw value wiped off the shares of energy giant CEZ and some banks. There were also concerns it could lead to legal challenges.
The coalition’s Pirate Party had been demanding that the windfall tax also apply retroactively for the whole of this year.
However, Jakub Michálek, who heads the Pirates’ deputies group, told the lower house they had dropped that insistence after a meeting involving Finance Minister Zbyněk Stanjura and PM Petr Fiala.
“In that discussion were very strong appeals from the minister and the prime minister that we not start that tax in 2022. So we decided to concede and we will not insist on 2022 during this session of the Chamber of Deputies.”
Coalition leaders still need to discuss the details of the windfall tax, which should be introduced at the start of January, even though the package of legislation it belongs to has now gone forward to a third reading after a vote on Tuesday.
The new legislation will place a 60-percent tax on Czechia’s six biggest banks, alongside energy and petroleum companies.
However, Jan Jakob, head of the deputies group of coalition party TOP 09, has proposed that this be reduced to 40 percent after the first year.
Aleš Juchelka of opposition leaders ANO said the fact the government would only fine-tune the bill before its third reading smacked of amateurism.
Meanwhile his party colleague Alena Schillerová criticized the fact the proposal was an amendment to a draft already being discussed, not a separate piece of legislation.
“It should have been communicated in the classic way, for instance with an accelerated comments procedure. But such a huge change to taxation, for so much money and of such fundamental nature, should not be passed in such a strange way.”
Finance Minister Stanjura says his officials estimate that compensation for high energy costs will cost the state around CZK 100 billion.