"The good right of the state": push for excess profit tax causes controversy

Many companies are suffering from the consequences of the Ukraine war.

"The good right of the state": push for excess profit tax causes controversy

Many companies are suffering from the consequences of the Ukraine war. Others are benefiting properly, especially the big oil companies. Three federal states are therefore demanding a levy for excess profits caused by the crisis. The proposal divides the opinions of politicians and experts.

Opinions differ about a push by the states of Bremen, Berlin and Thuringia for a special tax on high additional profits from companies as a result of the Ukraine war. While the SPD, the left and the German Institute for Economic Research (DIW) are in favor of the tax, the FDP and CDU are not enthusiastic.

The three countries want the Bundesrat to ask the federal government to submit a proposal for the temporary levying of such a tax for 2022. The aim is to levy a tax or levy on excess profits caused by the crisis, especially in the energy sector. State relief measures are then to be financed from the revenue. The finance and economic committees of the state chamber will first discuss the proposal before it is voted on in one of the next meetings.

While many people and companies were suffering from the consequences of the war, such as high inflation, and the state was taking billions in countermeasures, a few were filling their pockets, said Bremen's Prime Minister Andreas Bovenschulte. "They simply earn a fortune because they shamelessly exploit the current situation," said the SPD politician. In the first quarter of this year alone, the four oil companies Shell, BP, Exxon and Total more than doubled their net profit compared to the previous year from around 15 billion US dollars to around 34 billion. Thuringia's Federal and European Minister Benjamin Immanuel Hoff spoke of "perversion tendencies in our economy". According to the German constitutional order, it is "the state's right to skim off these profits through taxes," said the left-wing politician.

Such an "excess profit tax" would be the "wrong way" and "not a good idea," said Secretary of State for Finance Katja Hessel when deliberating on the application in the state chamber. "Such a tax would be economically counterproductive, legally problematic and certainly not quick to implement," said the FDP politician. Lower Saxony's CDU finance minister, Reinhold Hilbers, called the initiative "populist" and a "little tried and tested method". Many questions arose. "What is a war-related excess profit and at what level can it be assumed that it will occur? Are the expected possible excess profits in the armaments industry also related to the war? Undoubtedly. But are they also immoral?" Asked the CDU politician with a view to the previously also dated Federal Council decided to amend the Basic Law for the special fund of 100 billion euros to upgrade the Bundeswehr.

DIW boss Marcel Fratzscher advocates a special tax. "From an economic point of view, I think an excess profit tax is absolutely correct," Fratzscher told the editorial network Germany. During the pandemic, the state acted as an insurer for companies in bad times and replaced lost sales. "Now the other way around, there is an industry with the oil companies that makes excess profits. These are profits that are not really based on their investments and services rendered, but are the result of the war." Therefore, it makes economic sense to skim off part of the profits of the mineral oil companies and let the taxpayers benefit.

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