Poland eyes EU tax route to bypass presidential veto on energy windfall levy

Poland's government is exploring an unconventional route to implement a windfall tax on energy companies, potentially by pushing for an EU-level regulation. This strategy aims to circumvent a possible presidential veto, a hurdle that previously affected a tax on fuel companies.

The government is reportedly working on a proposal for an "excess profit" tax on oil and gas firms at the European Union level. This approach is reminiscent of the response to the 2022 energy crisis, which was exacerbated by Russia's aggression in Ukraine. The aim is to capture profits generated by companies due to factors like the war in the Middle East.

A joint letter from the finance ministers of Germany, Italy, Austria, Portugal, and Spain, along with Poland's finance minister, to Ireland's finance minister (currently holding the EU presidency) highlights this concern. The letter states that "oil companies are achieving overall profitability and margins on refined products that exceed the increase in crude oil prices."

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Oil companies are achieving overall profitability and margins on refined products that exceed the increase in crude oil prices.

This EU-level initiative could provide a simpler path to imposing the tax, as it would be framed as an implementation of EU law. Analysts suggest that such a regulation, potentially issued by the European Commission, could allow funds from higher margins, for example, from Orlen, to be transferred to the budget, bypassing the Polish president's stance. The president's office is generally seen as skeptical of tax increases.

Separately, the government had previously proposed a domestic increase in the corporate income tax (CIT) for the largest energy and fuel companies. This would raise the CIT rate for firms with revenues exceeding 50 million euros from the current 19% to 22% in 2027, with a gradual decrease to 23% by 2030. The proposed domestic tax would affect entities involved in gas and oil extraction, fuel trading, oil refining, electricity generation, and transmission. However, the exact method of calculating this tax remains uncertain, posing a risk for energy groups due to ambiguous interpretations of the new regulation.

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The information that the finance ministers of six countries, including Poland, are demanding an extraordinary tax on oil concerns from the EU, as was the case in 2022, could open a faster and simpler gateway to introducing a new levy that would allow the transfer of funds from higher margins, for example, from Orlen, to the budget, bypassing the president's position, in the event of a regulation issued by the EC.