Johnson told Good Morning Britain on Wednesday that he opposed one-time windfall taxes on energy companies, which state-funded researchers — and, at various times, his Conservative Party and the main opposition Labour Party — have recommended to deal with skyrocketing energy prices. On Tuesday, Johnson became the first western leader to speak directly to Ukraine's parliament following Russia's invasion in February, which sent already soaring inflation spiraling and prices for commodities both countries produce, including food and energy, rising at unprecedented rates.
"If you put a windfall tax on the energy companies, what that means is that you discourage them from making the investments that we want to see, that will, in the end, keep energy prices lower for everybody," Johnson told GMB.
The Labour Party in January had proposed a windfall tax on oil companies' profits. Johnson suggested that for the U.K. to achieve stability regarding energy prices, it must allow companies to reinvest profits into alternative supplies of energy, now that Russia's fossil fuels are too politically toxic for most Europeans to support consuming.
The GMB interviewer told Johnson a pensioner recently watched her annual energy costs rise by about £800 ($1,000), adding ordinary taxpayers are more worried about paying the bills than the war in Ukraine.
"They need to invest," Johnson said, referring to the energy companies.
Since war broke out in Europe, food and energy prices have risen across the globe, tracking alongside an uptick in the number of people falling into poverty, including children. The Organization for Economic Cooperation and Development has suggested windfall taxes on energy companies' record profits could help pay for exponentially higher costs for regular bills in Europe, which has been buying Russia's gas with taxpayers' money for decades.
The OECD reported in March that 27% percent of the European Union's crude oil imports, 41% of its natural gas imports and 47% of solid fuel imports came from Russia, according to the most recent data before the war. EU and U.S. sanctions against Russia's wealthiest and most powerful individuals have stalled against financial secrecy in western jurisdictions such as Amsterdam, where Russia's state-owned oil company Gazprom maintains shell companies, according to researchers.
"The reason for the increase in prices is the instability," Christy Wilson, an associate at Katten Muchin Rosenman's London office, told Law360.
Energy companies worldwide have posted record-breaking profits in the first quarter since the war began, as shareholders around the world benefit from rising prices as demand spikes amid war in Europe and spiraling inflation. Rather than targeting corporate profits with a high rate, the government might encourage less price gouging by targeting shareholders through existing measures, said Wilson, who specializes in transactional tax planning.
Windfall taxes are "very much being discussed by politicians and they are ... I would say, weaponizing windfall tax[es] in order to take down the other party," she said, noting that both major U.K. parties have introduced them as legislation at various moments.
In the U.S., Senate Budget Committee Chairman Bernie Sanders, I-Vt., introduced a bill in March that would levy a 95% tax on windfall profits of large corporations that exceed their average profit level from 2015 to 2019. Sen. Sheldon Whitehouse, D-R.I., and Rep. Ro Khanna, D-Calif., announced a bicameral bill March 10 called the Big Oil Windfall Profits Tax to "curb profiteering by oil companies and provide Americans relief at the gas pump." A day earlier, California Democratic Gov. Gavin Newsom said he wanted to help consumers pay for gas with state tax rebates.
Windfall taxes have pros and cons, Wilson said, and it's better to look at the tax system as a whole when assessing how to pay for government programs. She suggested the government could use the public interest business protection tax already in place and targeting energy companies, to stabilize prices, rather than a windfall profit tax. Higher rates don't translate to higher revenues, she said.
Energy companies, "through luck, have had a massive increase in profits," Wilson said, so if the government's aiming at "rectifying unjust enrichment" they'd likely cause less instability by targeting shareholders' dividends, rather than corporate profits.
Energy price spikes have far outpaced the U.K. government's spending on social programs to help, the GMB interviewer told Johnson during their interview. Revenue from windfall taxes on energy companies could help pay for programs targeted at citizens who can't afford such price spikes in their energy bills, according to the OECD.
"This country is in the insane position of having to pipe in electricity from France because we haven't done enough to invest in our own security and energy and electricity," Johnson said.
Johnson said his government has allocated £9.1 billion to help vulnerable U.K. taxpayers afford the price spikes in energy, a sum he acknowledged has been far outpaced by the rises in energy prices for the average consumer.
"The crucial thing is to make sure we deal with the prices over the medium and long term," Johnson said.
The prime minister's office didn't immediately respond to a request for further comment.
--Editing by Roy LeBlanc.
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