The European Union is being sued by the American energy company ExxonMobil in the hopes of convincing the EU to abandon its recently enacted windfall tax on oil companies.
Businesses that benefited from something for which they were not responsible are subject to a tax known as a windfall tax.
The invasion of Ukraine by Russia has contributed to supply issues, which has resulted in a significant increase in the price that energy companies get for their oil and gas.
However, Exxon has accused Brussels of going beyond the scope of its legal jurisdiction and has described the policy as “counter-productive.”
In October, ExxonMobil announced a quarterly profit of about $20 billion, which is equivalent to £17.3 billion.
- What exactly is the windfall tax that is levied on oil and gas companies?
Ursula von der Leyen, the head of the European Commission, made the proposal for big oil, gas, and coal firms to pay a “crisis contribution” in September. This “crisis contribution” would be calculated based on the corporations’ higher earnings in 2022.
It was declared that a tax of 33% would be applied on the earnings of this year, which were more than 20% more than the average of the profits from the three years before to this one.
However, in a lawsuit that it has submitted to the EU General Court in Luxembourg, Exxon contends that the fee inhibits investments and damages investor trust.
According to a statement made by an Exxon representative named Casey Norton to the Reuters news agency, “whether we invest here essentially depends on how attractive and internationally competitive Europe will be in the future.”
During a meeting with investors earlier this month, the chief financial officer of ExxonMobil projected that the levy imposed by the EU would result in “over $2 billion” in losses for the company.
According to the Financial Times, the European Commission said that it “takes notice” of Exxon’s legal action and stated that “it will now be up to the General Court to decide on this issue.”
The European Union is making significant efforts to wean itself off of energy supplied by Russia; nevertheless, this has forced the EU to scramble for alternate sources, which have higher costs.
The ministers of the EU believe that they will be able to collect €140 billion, which is equivalent to £123 billion, from the taxes placed on non-gas power producers and suppliers who are seeing higher-than-usual profits as a result of the present demand.