US energy giant ExxonMobil is suing the European Union (EU) in a bid to stop its new windfall tax on oil firms, reports BBC.
Windfall tax on oil firms
A windfall tax is imposed on firms that benefited from something they were not responsible for.
Energy firms are getting much more money for their oil and gas, partly due to supply concerns after Russia’s invasion of Ukraine. But Exxon has accused Brussels of exceeding its legal authority, calling the measure “counter-productive“.
ExxonMobil reported a quarterly profit of almost $20 billion (£17.3 billion) in October. The company, along with other major players in the oil and gas sector, has argued that a crackdown, however, would discourage investment.
33% tax on this year’s profits
In September, European Commission chief Ursula von der Leyen announced an emergency plan for major oil, gas and coal companies to pay a “crisis contribution” on their increased 2022 profits.
A 33% tax on this year’s profits was announced – those profits were more than 20% higher than the average for the three previous years.
Exxon has also argued that the levy undermines investor confidence, in a challenge filed at the EU’s Luxembourg-based General Court. “Whether we invest here primarily depends on how attractive and globally competitive Europe will be,” Exxon spokesperson Casey Norton told the Reuters news agency.
In an investor meeting earlier this month, ExxonMobil’s chief financial officer estimated that the EU tax would cost the group “over $2 billion“. The European Commission said it “takes note” of Exxon’s lawsuit.
Measures compliant with EU law?
In a statement on Thursday, its spokeswoman said it would now be up to the General Court to rule on the case. “The Commission maintains that the measures in question are fully compliant with EU law,” Arianna Podesta said in a statement.
The EU is largely trying to wean itself off Russian energy in the wake of the invasion of Ukraine, but that has left it scrambling for alternative sources.
EU ministers estimate that they can raise €140bn (£123bn) from the levies on non-gas electricity producers and suppliers that are making larger-than-usual profits from current levels of demand.
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Source: BBC
