Exxon Mobil Corp is suing the European Union on the grounds that the windfall tax on oil companies will hinder investment and end up being “counter-productive”, according to media reports.
According to the Financial Times, the first to report the story, Exxon filed the lawsuit at the European General Court in Luxembourg City on Wednesday through its German and Dutch subsidiaries. The lawsuit challenges the European Union Council’s legal authority to impose a windfall tax using emergency powers to force member state approval of the move.
The European Union windfall tax gives the bloc the authority to place a 33% levy on energy company profits for 2022.
Exxon spokesperson Casey Norton was quoted as saying on Wednesday that Exxon would be accounting for the windfall tax in its future multi-billion-euro investments, warning that the tax was outside the authority of Brussels and that it would end up being a destructive force for investor confidence.
“Whether we invest here primarily depends on how attractive and globally competitive Europe will be,” Norton was cited by Reuters.
Exxon’s chief financial officer, Kathryn Mikells, told analysts that the EU’s windfall profit taxes on oil companies could cost US$ 2 billion between now and the end of next year. That compares to the US$ 3 billion Exxon has invested over the past ten years in European refinery projects.
Exxon argues that its refinery projects are designed to help Europe reduce dependency on Russian oil and gas, and as such, the windfall tax will backfire.
However in related news the Finnish government announced on Thursday that it has proposed a temporary windfall tax on profits from the country's electricity companies as part of a European Union response to soaring power costs.
The proposed 30% tax would apply to any profits exceeding a 10% return on capital in 2023, with the government estimating it could bring in between 500 million and 1.3 billion Euros.
If the Finnish government goes ahead with its plans, it will join Germany and the UK as the other EU members that have introduced a windfall tax to energy and power companies. Starting December 1, Germany introduced a special levy that will see the country’s oil, gas and coal firms pay 33% of windfall profits, potentially generating a revenue of between one and three billion Euros.
Dubbed the EU energy crisis contribution, the tax is likely to affect dozens of energy companies and will target their 2022 and 2023 profits. The tax would be implemented by the end of 2022.
The new levy will affect oil, gas and coal companies whose profits for the current year and the coming one exceed by 20% or more than their 2018-2021 average.
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