As early as March, Italy reacted to the effects of the war in Ukraine and introduced a levy for companies in the energy sector: the "extraordinary solidarity levy" will – as of now – be levied once this year. According to then-Prime Minister Mario Draghi, the new tax is intended to “capture part of the excess profits that companies in the energy sector make as a result of higher commodity prices”. To put it plainly: Italy is asking companies to pay that are profiting particularly economically from the war in Ukraine. In Germany, too, there are repeated calls for a comparable instrument. SPD co-leader Saskia Esken recently renewed her call for an excess profit tax. But there are also opponents, especially from the ranks of the FDP and CDU.
Oil companies benefit greatly
Some companies are benefiting from the currently tense economic situation – especially the mineral oil companies. At the same time, as a result of the war in Ukraine, the financial needs of the public sector have increased significantly. The idea is that crisis-related corporate profit growth that exceeds a certain level will flow to the state as a tax. In the end, private households should also be relieved in this way.
As early as March, the EU Commission basically gave the green light for the member states to "consider temporary tax measures on random profits and, exceptionally, decide to earmark part of these profits for redistribution to consumers". "Excessive market distortions" must be avoided. However, lawyers in Germany have objections to an excess profit tax.
Even calculation is problematic
In July, Bremen, Berlin, Mecklenburg-Western Pomerania and Thuringia failed in the Bundesrat with their demand for a tax on particularly high crisis profits. There is currently no proposal as to what an excess profit tax in Germany could look like.
What's left to a company after its costs have been deducted is its profit – and it is taxed on it. It has not yet been clarified in the discussion as to when a profit would become "excess profit" on which the additional excess profit tax would be due. An elaboration of the scientific services of the German Bundestag deals with two calculation models: Both are based on the company income and use different parameters to compare periods from before and during the crisis. This is to show whether and to what extent profits have increased.
Basic law demands tax justice
From the point of view of tax law experts, including Till Meickmann from the University of Passau, an excess profit tax would violate the equality principle of the Basic Law. Accordingly, essentially the same facts must be treated equally and unequal facts unequally. In the tax context, the principle of equality requires tax justice, he says. The tax burden must be based on economic performance. With the same efficiency, companies would also have to be taxed the same way.
If the profits of companies that benefited particularly from the crisis were taxed more heavily than companies that increased profits in the same period for other reasons, the tax burden would no longer be the same. The legislature would have to justify this unequal treatment if it wanted to introduce the tax anyway.
There must be good reasons for unequal treatment
The Federal Constitutional Court has so far recognized three reasons that could justify a tax despite unequal treatment, explains Till Meickmann: steering purposes, simplification purposes and the purpose of combating the abuse of tax regulations. The purpose of "financing the increased state financial needs" is not one of them and is therefore no justification for an excess profit tax. But even the constitutionally recognized reasons could not justify an excess profit tax. In particular, the mineral oil companies would probably not allow themselves to be influenced by such a tax in the sense of "guidance purposes" to forego their excess profits. Even if they were subject to an increased tax burden.
Proponents of the excess profit tax argue with arguments of justice and practical considerations: For example, SPD co-leader Lars Klingbeil brought the tax into play as a way of financing a continuation of the 9-euro ticket.
Excess profit tax as a supplementary tax?
In the discussion about the excess profit tax, there is the question of whether it could be introduced as a supplementary tax on income and corporation tax. However, in December 2021, the Federal Constitutional Court narrowed the scope for structuring the income tax rate. Meickmann believes that these stipulations should not be circumvented by introducing a supplementary tax. The scientific service of the German Bundestag also expresses itself rather cautiously.
So far, taxes have been based on economic performance, no matter where the money comes from, says expert Meickmann. An excess profit tax is a break with this tax system. Politicians must ask themselves: "Do you want to open this box?"