Dáil Éireann Debate, Thursday - 2 June 2022
210. Deputy Ivana Bacik asked the Minister for Finance his views on the principle of a windfall tax on the super-normal profits of energy companies operating in the Irish market; the progress that his Department is making on the design and implementation of a windfall tax (details supplied); and if he will make a statement on the matter. [27397/22]
Amharc ar fhreagraThe European Commission has confirmed that EU Member States can consider imposing temporary tax measures on windfall profits of energy providers.
With regard to tax generally, the trading profits of companies in Ireland are typically taxed at the standard Corporation Tax rate of 12.5%. Some of the main features of the current regime are its simplicity and that it applies to a broad base. Changing the tax rate (or imposing additional levies on certain sectors) could have unforeseen consequences. There is a risk of such taxes leading to higher consumer costs and negative impacts on investment in the energy sector, in particular in the area of renewables.
Proposals for a windfall tax must take into account wider energy policy, under the remit of the Department of the Environment, Climate and Communications. A well-functioning EU electricity market is crucial for the integration of our Internal Energy Market and supporting investment in new renewables. The best long-term approach for Ireland to insulate consumers from volatility on international wholesale energy markets is to invest in energy efficiency and renewable energy. Cutting our dependence on fossil fuels and generating power from our own renewable sources will ensure a cleaner, cheaper energy future in the long term.
The complexities of the energy market and the range of producers and contracts must also be taken into account. For example, the Renewable Energy Support Scheme (RESS) contains strong consumer protection measures, with wholesale market revenues above the auction price returned to electricity consumers through the Public Service Obligation Levy.
As noted in the previous discussion cited by the Deputy, these are all important matters for consideration by the Government when looking at the wider context for energy taxation proposals. In this regard, the Government approved and published the National Energy Security Framework on the 13th April. The Framework sets out that the Government will work with the European Commission and other Member States to consider the policy proposals outlined under REPowerEU, designed to aid consumers and businesses to deal with increasing energy costs. REPowerEU is a joint European action for more affordable, secure and sustainable energy. The European Commission published the REPowerEU Plan on 18 May and analysis of these proposals is currently being undertaken.
In addition, the Government has taken a number of measures to reduce the burden on consumers in relation to the cost of energy. This includes providing €200 worth of energy credit to every household in the country; reductions in fuel excise duty; and a reduction in the VAT rate for electricity and gas.
