Uploading Companies to the North Sea oil companies allows to raise something with a minimum of political inconvenience
Governments line up to hit energy companies. Mario Draghi has said that it is reasonable for beneficiary firms to share the taxpayers’ burden. The hard part is how to do it. Spain thought it had found a way, but backed off a €3 billion confiscation after the companies pointed out that they had already sold electricity on the forward market at uninflated prices, and that therefore any tax could be passed on to customers.
That points to a key problem. Unlike EDF, most of the big German, Spanish and British utilities are owned by investors. Countries that tax windfall profits may be considered less attractive investment destinations. Italy, which has almost a quarter of Enel, could be next. The company has said that it has sold 100% of its electricity forward at uninflated prices. That hasn’t stopped former deputy prime minister Matteo Salvini from denouncing his “margins of madness.”
An alternative, at least in Britain, is to target oil and gas producers. There, a third of the North Sea production is controlled by the private equity, which is a good scapegoat. Labor believe that 1.4 billion can be raised by raising North Sea Societies from 30% to 40%. By discouraging production, you risk future supply crises, but you also contribute to decarbonisation.
Collecting taxes on oil and gas is not the end of the game. Sector-specific tax breaks, which allow operators to reduce taxable profits, can lower revenues, and sensible gas producers like Enel sell their product in the future. But another large part of North Sea production is controlled by oil companies such as BP and Shell, which are due to present record results in February. A confiscation that falls mainly on these firms will allow some money to be raised with a minimum of political inconvenience. It is enough for a bad idea to become reality.