Researchers from the EU Tax observatory have published a note about a new way to tax excess profits. This note presents a new way to tax excess profits. We propose to tax the rise in the stock market capitalization of companies that benefit from extraordinary circumstances, such as energy firms following the invasion of Ukraine in February 2022. Targeting the rise in stock market capitalization (which is easily observable) makes the tax much harder to avoid than standard excess profit taxes, and allows to capture rents irrespective of where multinational companies book their profits. We apply this proposal to energy companies that are headquartered or have sales in the European Union. We estimate that taxing the January 2022 to September 2022 valuation gains of energy firms at a rate of 33% would generate around €65 billion in revenue (0.3% of GDP) for the European Union. We discuss implementation practicalities and compare our proposals to other plans made to tax excess profits.

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Authors: Manon François, Carlos Oliveira, Bluebery Planterose & Gabriel Zucman.

About the Eu Tax Observatory

The EU Tax Observatory is an independent research laboratory hosted at the Paris School of Economics. It conducts innovative research on taxation, contributes to a democratic and inclusive debate on the future of taxation, and fosters a dialogue between the scientific community, civil society, and policymakers in the European Union and worldwide