Dutch govt. introduces new law to tax oil companies’ excess profits

Nov 03, 2022 News

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…even as Exxon enjoys tax-free profit in Guyana

Kaieteur News – At a time when American oil giant, ExxonMobil Corporation, is enjoying tax-free profits in Guyana the Government of The Netherlands has introduced a bill to levy some US$3.1B from fossil fuel companies amid the significantly increased energy rates.

On Tuesday, the Government of Netherlands announced that, “The Netherlands is introducing a temporary solidarity contribution for the fossil fuel sector. This solidarity contribution will be introduced with retroactive effect over the year 2022. This means that the large profits that have been or are being made as a result of significantly increased energy tariffs will be additionally taxed.”

The Dutch Government noted too that the proceeds of the solidarity contribution of an expected € 3.2 billion (US$3.1B) will be used to pay for the energy ceiling for small consumers. To this end, it was explained that with the new Bill, the Government is implementing the emergency intervention regulation in connection with the high energy prices of the European Union (EU).

It was pointed out that part of the regulation is the mandatory introduction of a ‘temporary solidarity contribution’ for the year 2022.  It was explained that the contribution will apply to the surplus profit of companies with activities in crude oil, natural gas, coal and the refining of petroleum.

According to the Dutch Government in order to calculate the excess profit, the average profit before corporate income tax for the past four years is used as a starting point. Companies with a profit before corporate tax in 2022 that is at least greater than 20% of the average profit for the years 2018 to 2021 are taxed extra for that part – the rate is 33%.

The move by the Dutch Government comes one day after President of the United States of America, Joe Biden threatened to increase the tax on the oil majors ‘outrageous’ profits. On Tuesday, Kaieteur News reported that President Biden made his statement just days after ExxonMobil announced that its third-quarter 2022 earnings was US$19.7 billion – and oil companies like British oil giant Shell and others also recording big profits.

The U.S President reiterated that the ongoing war between Russia and Ukraine has sent oil prices soaring, not just in America, but around the world.

“One by one major oil companies have reported record-breaking profits not just a fair turn-out for hard work…but I mean profits so high it’s hard to believe,” the President said.

He explained that Exxon’s profits for the third quarter of 2022 is nearly triple what the oil major made last year and the most profit made in its 152 year history. “Give me a break, enough is enough, look I’m a Capitalist and I have said this before, I have no problem with corporations turning a fair profit and getting a return on their investment and innovation, but this is not remotely what’s happening. Oil companies’ recording profits today are not because they are doing something new or innovative, their profits are a windfall of war,” he explained.

As such, he noted that, at the time of war any company receiving historic profits like the oil majors are recording, have the responsibility to, “act beyond their narrow self-interest of its executive shareholders.”

“I think they have the responsibility to act in the interest of its consumers, their community and their country. To invest in America by increasing production and refining capacity because they don’t want to do that they have the opportunity to do that,” the President said.

President Biden had explained that the oil companies can also lower the prices for consumers at the pump stations, to bring ease to Americans. However, he stated, if the oil companies who are raking in billions in profits fail to act they will face higher taxes on their excess profits and other restrictions.  He added that his team will work with Congress to look at the options available and will provide an update when Congress gets back.

“It’s time for these companies to stop war-profiteering. Meet their responsibilities to this country, give the American people a break and still do very well,” he said.

While several countries have are taking steps to tax the fossil fuel companies on their excess profits being made owed to the Russia-Ukraine war – Guyana on the other hand, does not tax Exxon’s affiliate Esso Exploration and Production Guyana Ltd (EEPGL).

EEGL is the operator of the country’s richest oil block. Guyana’s Stabroek Block is 6.6 million acres (26,800 square kilometers) and has approximately 11 billion proven barrels of oil.

The oil company continues to enjoy tax-free earnings owing to the Production Sharing Agreement (PSA) Guyana signed onto with the oil major. In fact, under the 2016 PSA Guyana has agreed to, under the taxation provisions, to pay Exxon’s share of Corporation and Income Tax. As such it would mean, that Guyana foregoes each year, billions of US dollars.

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