Debate: Keep the bills down: social and economic consequences of the war in Ukraine and the introduction of a windfall tax
Date: TUESDAY, 18 OCTOBER 2022
Speaker: Ivan Bartoš
Language: EN

Russia’s war of aggression against Ukraine and the weaponisation of energy supplies have driven energy prices to an unprecedented level and created a very difficult situation for many households and companies. Russia’s aim is clear: hit our societies and our economies to create internal dissent and to fracture social cohesion. We will not let this happen. The EU is collectively doing all in its power to address various dimensions of the crisis and in particular to mitigate the effect of rising prices. I will address the main dimensions of this coordinated response. A) The energy supply. First, we are taking all possible measures to avoid energy shortages this winter. In only a few months, we have diversified our supplies, replenished our storage facilities close to their maximum, ensured safety of supply, and taken steps whenever possible to encourage the economy to consume less. We see that the price increases weigh more heavily on low-income families whose energy needs account for a higher percentage of their budget; without government support, many cannot afford that. The explosion of energy prices is also hitting SMEs and energy-intensive companies hard. Many are facing an explosion of their costs. Many risk going bankrupt. Some production has been discontinued. Some companies have closed down. Others have no alternative but to move their production outside Europe. We must stop that. In order to address these challenges, energy ministers at the end of September reached an agreement on allowing to offer regulated electricity prices also to small- and medium-sized enterprises, not only households and micro-enterprises. Demand reduction measures, including a voluntary overall reduction target of 10% of gross electricity consumption and a reduction target of 5% of the electricity consumption in peak hours. Capping market revenues obtained by power generators using low-cost technologies other than gas. Mandatory temporary solidarity contribution applying to the profits of businesses active in the oil, gas, coal and refinery sectors, which has significantly increased compared to prior years. The second dimensions, or the ‘B)’ if you like: fiscal measures. At the national level. Member States are doing their part and have taken over the past few months numerous fiscal measures to alleviate costs for businesses and families. These include lower indirect taxes, social transfers to households, direct interventions on prices paid by consumers, and extraordinary taxes on windfall profits on which I will speak later. We need to make sure that these measures are temporary and well targeted so that they make a genuine difference for the most affected parts of our society. Our fiscal resources are not unlimited. Let’s use them efficiently. The third dimension: social measures. On the social front, the Czech Presidency decided to dedicate the informal meeting of employment and social ministers a few days ago, on 13 and 14 October, to a discussion on the impact of energy poverty and the Ukrainian crisis. In this context, I am pleased to mention that the recent adoption of the Minimum Wage Directive, which is a powerful and very concrete signal of the importance of the EU, attaches to ensuring a decent standard of living of all workers. It is only, though, with our combined efforts that we can rise to this challenge, and I look forward to an efficient cooperation with you on all the proposals and initiatives we will work together on. And, finally, the fourth dimension: windfall profits. Let me turn now to issues that that matter for windfall profits. On 7 October, a new regulation on emergency measures to reduce energy prices entered into force. The regulation introduces measures to collect and redistribute the energy sector’s surplus revenues to households and small- and medium-sized enterprises. More particularly, the new regulation addressed two types of windfall profits. First, it limits revenues of the electricity generators, including intermediaries that use so-called infra-marginal technologies to produce electricity such as renewables, nuclear and lignite. This is done via the introduction of a cap on the market revenues of infra-marginal technologies at 180 eur/mwh. Member States will be able to redirect the surplus revenues generated via the introduction of such a cap towards supporting and protecting final electricity consumers. Secondly, the regulation introduces a mandatory temporary solidarity contribution on the profits of businesses active in the crude petroleum, natural gas, coal and refinery sectors. The solidarity contribution will be calculated on taxable profits as determined under national tax rules in the fiscal year spending in 2022 and/or in 2023. The solidarity contribution will apply in addition to regular taxes and levies applicable in the Member States. This regulation was adopted in less than two weeks as an emergency solution to current crisis. What I presented here today was an overview of what we, as the EU, managed to achieve in only a few months to ensure that families and companies are sheltered from the worst economic consequences of this unjustified war of aggression. We do not know what the future holds or how long the current conflict will last, but we will certainly maintain our resolve to seek collective and articulated responses to ensure a sustainable cost of living for our citizens.