Italy Expects to Raise $4.2 Billion From Windfall Tax and Power Price Cap

The Italian government expects to raise around $4.2 billion (4 billion euros) from a new windfall tax on energy companies and a price cap on the electricity produced by coal, fuel oil, or renewable power generation, officials at the central bank, Bank of Italy, said on Monday. 

 

“With these measures the support to households and businesses will be partially funded through additional revenues stemming from those that have benefited from the extraordinary increase in energy prices,” Bank of Italy official Fabrizio Balassone said at a Parliament hearing on the budget measures for the period 2023-2025. 

Next year, Italy plans to impose a one-off windfall tax of 50% on the extra income energy firms have booked as a result of the rise in oil and gas prices. The tax is 50% of the part of 2022 income which is at least 10% higher than the average income reported between 2018 and 2021, in the latest version of the windfall tax plan seen by Reuters.

According to the Bank of Italy, the government will raise $2.74 billion (2.6 billion euros) from the windfall tax, and another $1.48 billion (1.4 billion euros) from a price cap on electricity production from coal, fuel oil, and renewables. The price cap, which will be in place between December 1, 2022, and June 30, 2023, is at $190 (180 euros) per megawatt-hour (MWh), per EU regulations.

The budget, the first for Italy’s new government led by Giorgia Meloni, looks to impose higher windfall taxes on energy days after the UK also raised its taxes on oil and gas producers operating in the North Sea and expanded the windfall tax to include low-cost electricity generators.

Last month, UK Chancellor of the Exchequer, Jeremy Hunt, said in the Autumn Statement that the UK is raising the Energy Profits Levy by 10 percentage points to 35% from January 1, 2023, and is extending it to the end of March 2028, from December 31, 2025, as originally planned when the levy was 25%. The government expects the Energy Profits Levy to raise over £40 billion by 2027-28.

The UK government also imposed a temporary 45% Electricity Generator Levy that will be applied to the extraordinary returns being made by electricity generators.

Last month, Austria also unveiled plans to impose a windfall tax on energy firms, including a tax of up to 40% for oil and gas companies.