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A Modern Excess Profit Tax

Author

Listed:
  • Manon François

    (EU Tax Observatory and Paris School of Economics)

  • Carlos Oliveira

    (EU Tax Observatory and Nova School of Business and Economics)

  • Bluebery Planterose

    (EU Tax Observatory)

  • Gabriel Zucman

    (UC Berkeley and EU Tax Observatory)

Abstract

This paper presents a new way to tax excess profits. We propose to tax the rise in the stock market capitalization of companies that benefit from extraordinary circumstances, such as energy firms following the invasion of Ukraine in February 2022. Targeting the rise in stock market capitalization (which is easily observable) makes the tax much harder to avoid than standard excess profit taxes, and allows to capture rents irrespective of where multinational companies book their profits. We apply this proposal to energy companies that are headquartered or have sales in the European Union. We estimate that taxing the January 2022 to September 2022 valuation gains of energy firms at a rate of 33% would generate around AC80 billion in revenue (0.4% of GDP) for the European Union. We discuss implementation practicalities and compare our proposals to other plans made to tax excess profits.

Suggested Citation

  • Manon François & Carlos Oliveira & Bluebery Planterose & Gabriel Zucman, 2022. "A Modern Excess Profit Tax," Working Papers 005, EU Tax Observatory.
    • Handle: RePEc:dbp:wpaper:005
    as

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    File URL: https://www.taxobservatory.eu//www-site/uploads/2022/09/EUTO_WP5_A_Modern_Excess_Profit_Tax-1.pdf
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    More about this item

    Keywords

    Excess Profits Tax; Windfall Taxation; Stock Market Capitalization; Energy Sector Profits; Tax Avoidance; European Union Fiscal Policy;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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