Windfall taxes
Germany this week set out its plan to claw back 90 per cent of the earnings from some clean power generators as the government seeks funding for its consumer aid package. The windfall tax will be applied to electricity producers based on the fuel they use. Prime Minister Pedro Sánchez has said the taxes are a way for big business to “lend a hand” while many Spanish families are suffering from a sharp rise in the cost of living as a result of Russia’s war in Ukraine.Spain wants to raise a total of €3 billion from big banks over the next two years via a 4.8 per cent tax on their income from interest and commissions. From utilities, it is aiming to raise €4 billion over the same period with a 1.2 per cent tax on their sales.
The IMF highlighted the fact that in both sectors, Spain’s taxes are applied to revenues instead of profits. Although bank revenues from interest payments are rising as interest rates go up, the fund noted that costs could also rise if an economic slowdown led to more loan defaults.Earlier this month, the European Central Bank criticised the bank tax, warning in a non-binding opinion that it could damage the capital position of lenders and disrupt monetary policy.