{"id":7582,"date":"2022-09-05T20:00:00","date_gmt":"2022-09-05T19:00:00","guid":{"rendered":"https:\/\/www.taxpolicy.org.uk\/?p=7582"},"modified":"2023-02-07T11:47:08","modified_gmt":"2023-02-07T11:47:08","slug":"designingwindfalls","status":"publish","type":"post","link":"https:\/\/heacham.neidles.com\/2022\/09\/05\/designingwindfalls\/","title":{"rendered":"How to design a \u00a330bn windfall tax on the energy sector"},"content":{"rendered":"\n

If we wanted to raise significantly more than the Government’s \u00a35bn Energy Profits Levy<\/a>, how would we do it? <\/strong><\/p>\n\n\n\n

This is a further explanation and expansion of points I make in Panorama’s programme on the energy crisis<\/a>, broadcast on 5 September, and follows my previous post discussing two serious flaws<\/a> in the Energy Profits Levy – the relatively modest “windfall tax” the Government introduced in May.<\/p>\n\n\n

The politics<\/h2>\n\n\n

I’m not going to get into the rights<\/a>\/wrongs<\/a> of windfall taxes, other than to note that the political case for a more ambitious tax may be hard to resist if energy companies make \u00a3170bn of “excess profits”<\/a> over the next two years, when at the same time it seems increasingly likely that the Government is going to spend \u00a318bn<\/a> or even \u00a329bn<\/a> keeping energy prices down for consumers. <\/p>\n\n\n

The design challenges<\/h2>\n\n\n

The big problem is: how do we define an “excess profit”? The apparent<\/a> Treasury leak<\/a> of the \u00a3170bn figure didn’t bother to say1<\/a><\/sup>Which is one reason to be suspicious of the leak, and of the figure<\/span>.<\/p>\n\n\n\n

It was relatively easy for the last two big UK windfall taxes.<\/p>\n\n\n\n