Minister told to impose windfall tax on 'wartime profits' of energy firms
The For Picture: Paschal Is Pa 'war Owners Finance On To Profiteering' Fears Pressure Among Allay Business Donohoe Over Minister
Finance Minister Paschal Donohoe must impose windfall taxes on energy firms' “war-time profits”, business leaders have warned, after gas prices in Europe spiked 15% higher on Monday to hit new record levels.
Neil McDonnell, chief executive of Isme, admitted it is unusual for a business group to seek corporate tax hikes, but the windfall taxes are required because small firms are facing an “emergency”, and will require significant amounts from the Government beyond its budget next month.
"We are looking at the oil, gas, and electricity companies generating huge profits simply because, you could argue, of virtual war-profiteering.
“It is not the usual thing we would advocate, but it is fair that the Government should capture some of the profits to mitigate what it is paying out to consumers and small businesses."
The business chief said further hikes in wholesale gas prices will only mean more profits for the energy companies, and higher dividend payments for their shareholders.
They will likely also lead to energy bill hikes for households, who are already facing an average annual increase of €26 on their electricity bills from the start of next month, to prevent the lights going off this winter.
Monday's spike in market gas prices does not automatically mean the bills for Irish households and businesses will leap by a further 15%, experts say, but gas is used by power stations across the country to generate a large part of the power on the all-Ireland grid.
Even before Monday's price hikes, wholesale gas prices had leapt 11-fold.
Rocketing energy costs have been passed onto consumers and helped to drive consumer price inflation to levels not seen for 30 and 40 years in many European countries.
Economist Austin Hughes said Monday's wholesale gas price hikes will influence Irish gas prices.
Mr Hughes had earlier this month estimated that Mr Donohoe would need to deliver an energy package of between €1bn and €2bn in next month's budget, to make a meaningful contribution to shielding households and businesses from surging energy prices on wholesale markets.
Yesterday, Mr Hughes said customers will have to endure some sort of pain, but said that a package at the upper end of his estimate of €2bn will now be required, and still allow the Government to post a budget surplus.
The increase in continental gas prices was among one of the sharpest in any day since the invasion of Ukraine on February 24.
It came following renewed fears about the security of gas supplies from Russia to the European Union and has stoked fears of recession across Europe.
“The catastrophe is already there,” Thierry Bros, a professor in international energy at Sciences Po in Paris, said.
Belgian Prime Minister Alexander De Croo said Europe could face up to 10 difficult winters.
Chris Beauchamp, chief market analyst at online broker IG, said that “investors now think a recession in Europe and the UK is unavoidable”.
On futures markets, European wholesale gas prices for delivery in September to customers, such as power stations and large energy-hungry manufacturers like cement makers, reached as high as €295 per megawatt hour before settling at €280 per MW hour at the close of trading.
The inflation pressures at the factory gate were starkly illustrated by new figures which showed wholesale electricity prices had jumped 83% in July from a year earlier.
Ireland has access to the Corrib field off the Mayo coast for about a quarter of its annual gas needs and gets most of the rest from the North Sea.
Wind farms also account for a significant part of overall electricity consumption, but mostly in the late winter months when the Atlantic storms blow.