Energy companies could have to pay the State as much as €600 million over the next 15 months under the Government’s plans to bring in windfall tax measures.
The Russian invasion of Ukraine sent energy costs soaring, contributing to a cost-of-living crisis for households. Planned legislation to bring in taxes on the huge profits being made by energy companies have been in development since last year.
Earlier this month Minister for the Environment Eamon Ryan received Cabinet approval to divide the proposed Windfall Gains Bill into two separate Bills – the first dealing with fossil fuel companies and the second to cover electricity generators.
The tax measures to be brought in across the two Bills could bring in a combined total of between €280 million and €600 million. The Windfall Gains Bill was split in two to allow for the collection of a “temporary solidarity contribution” (TSC) from large gas and oil companies more quickly.
The first of the Bills, the Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Bill 2023, was published on Friday. The intention is for this legislation to be passed by the Oireachtas before the summer recess and a Dáil debate is scheduled for next week.
The TSC is calculated on a portion of a company’s taxable profits which are more than 20 per cent higher than a baseline of taxable profits for the period 2018-2021 and is applied at a rate of 75 per cent. The TSC will be applied for the years 2022 and 2023, and the Government estimates that the proceeds from fossil fuel companies will be between €200 million and €450 million.
Under the plans payment of the TSC for the year 2022 will be due by September 23rd this year and TSC payments related to profits in 2023 will be due by September 23rd, 2024.
A Department of the Environment statement said the revenues are to be used to fund financial supports for households and businesses affected by high energy prices and may also be used to support investment in renewable energy.
Decisions on how to distribute the proceeds are to be made as part of the budgetary process.
Minister for the Environment Eamon Ryan said: “This Bill is welcomed as it will collect significant proceeds that can be used to ease the impact of high energy prices on vulnerable energy consumers.”
The second Bill is to bring in a cap on market revenues for electricity generators.
The Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Bill 2023 is to be published before the Dáil break and enacted in the autumn. The estimated revenue from the market cap for electricity companies is between €80 million and €150 million.
Provisional dates have been set out for companies to make formal declarations (November 30th, 2023) and payments (December 31st, 2023) to the Commission for Regulation of Utilities.
