Finance Minister Constantinos Petrides shot down two bills tabled by the Opposition targeting excess profits with a 90% windfall tax on producers of Renewable Energy, arguing they lack fiscal logic.
“The two AKEL law proposals, for a windfall tax on profits of renewable energy production companies, and the imposition of a retribution fee on bilateral renewable energy contracts at an amount that will exceed the maximum purchase price from renewable energy, are haphazard,” said Petrides.
The minister argued that the opposition had not put much thought into its proposals, ignoring that these companies would reinvest early profits into more infrastructure projects.
“Lacking any economic logic, they (the bills) will, without a doubt, act as a disincentive in a punitive manner towards these investments, minimising the prospects of encouraging and developing the sector.
“AKEL treats a sector that will be key to cheaper energy as part of the problem”, he argued.
One proposal is based on the difference in the gross profit margin compared to the previous year and does not consider the total expenses as it is based on the expenses related to the cost of sales only.
“Furthermore, based on the provisions of the said proposal, taxation is imposed only on RES suppliers and excludes RES producers participating in plans until the start of the Competitive Electricity Market, which limits to a minimum any revenue arising from such taxation.”
Petrides argued that based on the provisions of the second proposal, the kickback fee imposed on future sales of RES electricity does not take into account any windfall profits created since the beginning of the energy crisis due to the invasion of Ukraine by Russia and also ignores the total costs of the contracting party that will be selling RES electricity.
He said the tax on windfall profits made by RES energy producers, proposed by AKEL, will not significantly increase state coffers.
“It is an insult to the public’s intelligence to present this potential revenue as the solution to wealth redistribution for the benefit of our fellow citizens during the current energy crisis.
“Especially when the government has allocated more than €400 mln through subsidising the price of electricity, reduced consumption tax on fuel, VAT on electricity, and other targeted measures.”
Petrides revealed that the government would table a bill which imposes a special fee on the turnover of electricity producers and suppliers, the level of which will not act as a disincentive for the further penetration of RES in the electricity market.
The bills tabled by the left-wing party foresee that producers will be taxed retrospectively for any excess profits they made in 2021 and 2022.
The proposals also tax the excess profits of companies selling petrol products, claiming that firms made extra profits taking advantage of the fluctuation of petrol prices internationally.
According to AKEL, taxation will impose a “return fee” on producers.
According to the proposal, windfall profits are the positive difference in the gross profit margin of the month under review compared to the same month of the previous year.
Gross profit margin is the profitability ratio, expressed as a percentage of the gross profit on sales, during an accounting period.