Governments are proposing windfall taxes on energy firms

ON MARCH 8th, the day the price of a barrel of Brent crude oil spiked above $127, the European Commission unveiled its grand plan to fight stratospheric living costs. Claiming that the “crisis situation” warranted exceptional measures, it recommended that member states levy a one-off tax on electricity-generating firms. The revenues raised could then be used to keep households’ bills down. The next day Elizabeth Warren, a senator from Massachusetts, tweeted that she and other legislators were working on a tax on the “war-fuelled profits” accruing to American oil majors. The proposal is now making its way through the House of Representatives.Politicians have reached for such “windfall” taxes before. Bulgaria, Italy, Romania and Spain have imposed them on power generators in recent months, as benchmark energy prices have risen. America began taxing oil producers in 1980, hoping to cash in on profits that were expected to be made after prices were deregulated. Britain’s new Labour government taxed utilities in 1997, after the Conservative government had sold them off cheaply.