Spain will introduce a windfall tax on power companies and banks from next year to fund measures designed to help Spaniards cope with soaring inflation.
Annual revenue from the tax on extraordinary profits of large electricity, oil and gas companies in 2023 and 2024 will be €2 billion (US$2 billion), Prime Minister Pedro Sánchez told parliament in a state of the nation address yesterday.
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The measure will come into effect from 1 January 2023 and apply to extraordinary profits secured by companies over 2022 – 2023.
Also announced was a windfall tax on banking entities that will last for two years and is expected to raise €1.5 billion per annum.
“This government will not tolerate that there are companies or individuals that take advantage of the crisis to amass wealth at the expense of the majority,” Sánchez said.
Inflation, he explained during the speech, is now the main challenge facing Spain and most world economies.
Funds raised will be used to provide free travel on commuter trains between September and December and build new houses in Madrid, among other measures.
The policy comes after Spain’s government introduced a mechanism last year to limit windfall profits of renewables plants projects with a capacity greater than 10MW that sell power on the merchant market.
In addition, industry groups warned last month that a proposed law in Spain that is designed to claw back revenues from emissions-free power plants would create risks for renewables investors.
According to a letter sent to the European Union by trade bodies such as Eurelectric and WindEurope, Spain’s government has relaunched the legislative procedure on the draft law for a new regulation that will reduce the revenues of non-CO2-emitting generation facilities installed before 2003. The draft law, they said, “seriously undermines investment incentives” for decarbonised electricity generation.
Renewables asset owners in Italy have also been hit by measures to claw back profits stemming from high electricity prices. The country’s government announced in January it would limit the windfall profits of some feed-in tariff-backed PV projects as part of a policy that is impacting more than half of the country’s solar fleet, according to one estimate.