Fair or populist?: Economists argue about excess profit tax

Should the state skim off crisis profits from oil multinationals with an extra tax? Finance Minister Lindner thinks nothing of it, but parts of the traffic light coalition can warm to the idea.

Fair or populist?: Economists argue about excess profit tax

Should the state skim off crisis profits from oil multinationals with an extra tax? Finance Minister Lindner thinks nothing of it, but parts of the traffic light coalition can warm to the idea. Opinions also differ among leading economists.

There is a dispute among economists and in the coalition about the benefits of an excess profit tax for mineral oil companies. This could be used to skim off extra profits as a result of price increases after the start of the Ukraine war. The German Institute for Economic Research (DIW), like politicians from the SPD and the Greens, advocates such a tax. The tax cut on petrol and diesel on June 1, however, was a mistake. "Because most of the three billion euros in tax money will end up in the pockets of the oil companies," says DIW President Marcel Fratzscher.

"The federal government should follow the example of Italy and Great Britain and introduce an excess profit tax for oil companies," suggested Fratzscher. "This could be levied on the additional sales compared to 2021 and include a 50 percent tax on additional profits." The DIW boss argued that mineral oil companies would still make decent profits, but the state and thus the taxpayers would also share in these unprofitable profits. The government should then return the savings from the abolition of the tank discount and the excess profit tax to all citizens in the form of an energy flat rate.

Other economists, on the other hand, warn of an excess profit tax. The former boss of the economic experts, Lars Feld, called the discussion "populist". "It is unlikely to be constitutional. From an economic point of view, one will also have to ask whether the state will then have to compensate for excessive losses in the future," said the economic adviser to Federal Finance Minister Christian Lindner of the "Rheinische Post". Instead of tax increases, further relief is now needed. Lindner himself had already rejected an excess profit tax on Tuesday.

In the evening, the FDP leader underlined his position on the ARD program "Maischberger". "Anyone who thinks they're going to introduce an excess profit tax can't be sure that it won't be passed on to prices," he warned. Lindner also argued that tax law does not recognize excess profits, only profits, which are heavily taxed in Germany. He doesn't want the tax law to be determined "according to the mood (...) at the regulars' table". "Tax law must be neutral," said the finance minister.

Economics Veronika Grimm also criticized the debate. "Ultimately, the excess profit tax should do more harm than good," she told the "Rheinische Post". "First of all, there is no clear definition of what exactly an excess profit is. There is a great danger that companies will also be taxed that have contributed to overcoming the crises with their activities," said the member of the Federal Government's Economic Expert Council.

Union faction deputy Thorsten Frei called the idea of ​​an excess profit tax "pure planned economy, it has nothing to do with market-based thinking". Monitoring the mineral oil companies is a matter for the cartel office, Frei told the "Rheinische Post". The CDU politician Jens Spahn, also Union parliamentary group leader, on the other hand, thinks that unjustified extra profits from oil multinationals, like in Great Britain, should be skimmed off with a tax. The Greens budget politician Paula Piechotta told the dpa: "Social market economy also means taking action against concentration of power in the market and active tax policy - especially in times of crisis like now." An excess profit tax could "have a balancing effect if a few make immense profits at the expense of everyone without having created any added value."

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