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A Modern Excess Profit Tax

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  • Manon François

    (EU Tax - EU Tax Observatory, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Carlos Oliveira

    (EU Tax - EU Tax Observatory, NOVA SBE - NOVA - School of Business and Economics - NOVA - Universidade Nova de Lisboa = NOVA University Lisbon)

  • Bluebery Planterose

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EU Tax - EU Tax Observatory)

  • Gabriel Zucman

    (EU Tax - EU Tax Observatory, UC Berkeley - University of California [Berkeley] - UC - University of California)

Abstract

This paper presents a new way to tax excess profits. We propose to tax the rise in the stock market capitalization of companies that benefit from extraordinary circumstances, such as energy firms following the invasion of Ukraine in February 2022. Targeting the rise in stock market capitalization (which is easily observable) makes the tax much harder to avoid than standard excess profit taxes, and allows to capture rents irrespective of where multinational companies book their profits. We apply this proposal to energy companies that are headquartered or have sales in the European Union. We estimate that taxing the January 2022 to September 2022 valuation gains of energy firms at a rate of 33% would generate around €80 billion in revenue (0.4% of GDP) for the European Union. We discuss implementation practicalities and compare our proposals to other plans made to tax excess profits.

Suggested Citation

  • Manon François & Carlos Oliveira & Bluebery Planterose & Gabriel Zucman, 2022. "A Modern Excess Profit Tax," Working Papers halshs-04103540, HAL.
  • Handle: RePEc:hal:wpaper:halshs-04103540
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04103540v1
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    References listed on IDEAS

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    1. Ludvig Wier & Gabriel Zucman, 2022. "Global profit shifting, 1975-2019," WIDER Working Paper Series wp-2022-121, World Institute for Development Economic Research (UNU-WIDER).
    2. Mr. Shafik Hebous & Dinar Prihardini & Nate Vernon-Lin, 2022. "Excess Profit Taxes: Historical Perspective and Contemporary Relevance," IMF Working Papers 2022/187, International Monetary Fund.
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    Cited by:

    1. Evgeniya Dubinina & Javier Garcia-Bernardo & Petr Janský, 2024. "The excess profits during COVID-19 and their tax revenue potential," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(4), pages 1001-1036, November.
    2. De Vito, Antonio & Pancotto, Livia & Perdichizzi, Salvatore & Reghezza, Alessio, 2023. "Don’t go on holiday in August! Market reaction to an unexpected windfall tax on banks," Economics Letters, Elsevier, vol. 233(C).
    3. Johannes Huber & Christian Scharrer, 2024. "The fiscal and intergenerational burdens of brakes and subsidies for energy prices," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(5), pages 1249-1273, October.

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