Gerald Nash (Louth, Labour)
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127. To ask the Minister for Finance the projected yield to the Exchequer of introducing a new windfall profits tax on energy providers if the corporation tax rate on their profits was increased from 12.% to either 25%, 27.5% or 50% respectively; the additional yield if a different approach of a 25% levy on profits was introduced; if any work has been carried out in his Department to evaluate a windfall tax on energy companies; if briefing or discussion papers have been prepared on same; and if he will make a statement on the matter. [38613/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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Energy policy, including increasing costs of energy supply and the taxation of profits, is a matter of key concern to the Government. In April, the Government approved and published the National Energy Security Framework, which sets the overarching response to the impacts of the war in Ukraine on the energy system in Ireland. The Framework outlines the structures which are in place within Government to monitor and manage our energy supplies, it sets out the plans which are in place to deal with energy security emergencies and it sets out how Government can support households and businesses save energy and save money.

The Framework includes a commitment to work with the European Commission and other Member States to consider the proposals set out in the EU’s REPowerEU plan. Under REPowerEU, it is considered that taxation or regulatory measures aimed at removing gains created by the current crisis situation could be considered.

The increasing cost of energy supply is complex and there are many factors which must be considered including energy security, rising input costs and costs to consumers, and the need to reduce dependence on fossil fuels. The complexities of the energy market and the range of producers and contracts must also be acknowledged. The Renewable Energy Support Scheme (RESS) contains strong consumer protection measures, with wholesale market revenues above the auction price returned to electricity consumers through the Public Service Obligation Levy. All of these aspects must be considered in connection with proposed new policy measures.

Energy policy is under the remit of the Department of the Environment, Climate and Communications (DECC). The Energy Security Energy Group, which is chaired by DECC and includes the Commission for Regulation of Utilities, is considering these issues in its role overseeing the implementation of the National Energy Security Framework.

Officials in DECC are working to examine where gains created by the current crisis situation may be occurring and to consider what, if any, action would be appropriate having regard to over-arching energy policy. This includes engaging with Department of Finance officials to determine potential fiscal response measures. This ongoing work includes consideration of potential negative impacts of any such action. For example, there is a risk that a windfall tax may lead to higher consumer costs and negatively impact upon investment in the energy sector, particularly in the area of renewables. This would negatively impact the Government's ambitions to tackle climate change through the reduction of carbon emissions.

It is worth noting that the Government has taken a number of measures to reduce the burden on consumers in relation to the cost of energy. This includes providing €200 worth of energy credit to every household in the country; reductions in fuel excise duty; and a reduction in the VAT rate for electricity and gas.

With regard to the projected yield to the Exchequer of introducing a new windfall profits tax on energy providers. Trading profits of companies in Ireland are generally taxed at the standard Corporation Tax rate of 12.5%.

I am advised by Revenue that the gross additional yield from increasing the corporation tax rate from 12.5% to 25%, 27.5% or 50% on the taxable profits of all energy providers is tentatively estimated to be in the region of €90 million, €108 million and €271 million respectively, for a full year. These estimates are based on the 2020 tax returns of energy providers, the latest year for which fully analysed data are available. On the same basis, a separate 25% levy on taxable profits, in addition to corporation tax, would yield in the region of €180m.

It should be noted that these estimates do not take account of any potential change in behaviour by the entities concerned in response to changes in the tax rate.