Exxon sues for EU tax

Exxon sues for EU tax

An ESSO gas station is seen on December 29, 2022 in Diegem, Belgium. Esso is a brand associated with the American oil company ExxonMobil. Thierry Monas / Getty Images

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In September, 2022 the European Union (EU) decided to tax excess profits from fossil fuel companies in response to the energy crisis.

However, one of those companies does not take kindly to the so-called “solidarity levy”. ExxonMobil announced on December 28 that it is suing the bloc for the fall tax.

“This tax will undermine investor confidence, discourage investment and increase reliance on imported fuel and energy products,” ExxonMobil spokeswoman Erin McGrath said in a statement reported by The Hill.

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The idea of ​​an excessive tax on fossil fuel profits gained popularity following the spike in energy prices following Russia’s invasion of Ukraine. Fossil fuel companies such as ExxonMobil and Shell reported record profits after the invasion, even as extreme weather events exacerbated by the climate crisis increased throughout the year. Therefore, the European Council decided that it will impose its “solidarity contribution” on taxable fossil fuel profits from 2022 and 2023, which are higher than 20% of the average taxable profits since 2018. This tax reaches 33%, according to The Hill.

Beyond the EU, Britain has also imposed a tax on oil and gas profits, according to Reuters. He raised that tax from 25 to 35 percent in November of last year, and the tax will run from Jan. 1 through March 2028. President Joe Biden has also threatened to follow suit if oil and gas companies don’t act to lower energy prices.

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The EU tax was part of a broader legislative package designed to control energy prices, which included additional taxes on power generators and financial assistance for some customers, according to POLITICO. However, Exxon’s lawsuit only targets the fossil fuel tax.

The lawsuit was brought to the General Court of the European Union through the company’s German and Dutch subsidiaries.

“Our affiliates, ExxonMobil Producing Netherlands BV and Mobil Erdgas-Erdöl GmbH, are suing the European Council in an attempt to overturn a new tax on oil and gas companies,” said ExxonMobil spokesman Casey Norton in Texas, as reported by POLITICO.

The lawsuit claims that only national governments are allowed to authorize tax. However, the measure was passed through Article 122 of the EU Treaty, which allows the European Commission to propose measures for the European Council to then adapt through a vote of the member states.

“The Commission maintains that the measures in question are fully compliant with EU law,” Commission spokeswoman Ariana Podesta said, as reported by POLITICO.

The European Commission said the levy would raise €25 billion “to help reduce energy bills”, as reported by the Financial Times. Exxon, which reported record profits of nearly $20 billion in the third quarter of 2022, says the falling tax could cost it $2 billion by the end of 2023.

The European Court must now decide whether to take the case, and any decision can be appealed to the European Court of Justice. The levy went into effect on the last day of 2022, and the lawsuit was powerless to stop it, POLITICO noted. The ensuing legal battle could drag on for years.

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