German Coalition Split on Taxing Energy Firms’ Windfall Profits

(Bloomberg) -- The German government is split over whether it should impose a tax on the windfall profits from energy firms as a way to mitigate rising costs for consumers and companies.

Economy Minister Robert Habeck, a member of the Green Party and the vice chancellor in the ruling coalition, was supportive, saying on Wednesday that the “siphoning off of excess profits” is “still an important issue” and is “on the agenda” along with the idea of an import levy or a price cap.

However, he cautioned that it's a complicated process to implement such measures and potentially problematic targeting individual sectors.

Speaking at the same news conference, Finance Minister Christian Lindner, the chairman of the pro-business Free Democrats, said the government shouldn't take such a step as it could sap resources for investing in renewable power.

“Such concepts were already being discussed in the 1970s, but have never been implemented,” Lindner said after a cabinet meeting in Meseberg, north of Berlin. “It cannot be clearly identified what an excess profit is and what effect would be associated with it.”

European energy prices have soared following Russia's invasion of Ukraine and as the European Union debates a sixth set of sanctions that would target Russian oil.

EU countries have been assessing how to lessen the impact, and Italy has raised its windfall tax on energy firm profits to 25%.

Ricarda Lang, a co-leader of Germany's Greens, this week demanded an additional tax on all companies that reap an excess profit due to the war in Ukraine.

“If it becomes apparent that some companies knowingly and above all excessively profit from the horror of this war, then we should introduce an excess-profit tax,” Lang said Monday after a party leadership meeting in Berlin.