Windfall tax on energy firms comes into effect by end-year

In Portugal, a tax on extraordinary profits in sectors linked to energy is to be subject to a separate draft law, to come into force before the end of the year, the minister of finance, Fernando Medina, said on Monday at a news conference to present the draft state budget for 2023.

The planned windfall tax “will be the subject of its own draft law,” Medina explained. “It is here in the State Budget, to signal its impact on next year’s fiscal framework, but it will have to have its own legislative initiative that makes it come into force still in 2022.”

The measure is to go ahead after Portugal supported a European Commission proposal for the creation of such a tax, targeting companies in the oil, natural gas, coal and refining sectors.

In Portugal, the measure will be called the Temporary Solidarity Contribution (CTS) and is to have a “minimum rate of thirty-three percent” – in line with “what was the decision at European level, and to which all countries are naturally subject,” Medina said.

The tax, advocated by the commission, is aimed at windfall profits of companies that have enjoyed higher-than-normal turnover due to the war in Ukraine.

The government on Monday submitted to parliament its 2023 budget bill, which forecasts growth in gross domestic product of 1.3% next year, and a public sector budget deficit of 0.9% of GDP.

Medina said that the proposal will boost incomes and foster investment while maintaining the Socialist government’s commitment to sound public finances in an adverse external environment of war in Europe and escalating inflation.

The government aims to reduce net public indebtedness to 110.8% by the end of next year, from 115% this year, and projects inflation to slow to 4.0% next year from from 7.4% this.

The bill is to be given its first reading in parliament on October 26 and 27, with the final vote scheduled for November 25.

(Last updated at 09h25 am)