EU Considers Windfall Tax on Oil Companies

A 'Robin Hood' tax is one idea to combat record fuel prices

An Italian proposal to hit oil companies with a special windfall tax gained EU traction on June 3, with several countries willing to consider the measure as a response to record fuel prices. Facing growing calls for government action in the face of record food and oil prices, EU finance ministers are struggling to come up with proposals to provide relief. Italy's new Economy Minister Giulio Tremonti floated the idea, at a meeting with his EU counterparts in Luxembourg, of a so-called 'Robin Hood' tax that could be applied to oil companies and used to help those hit hardest.

Acknowledging that the idea remained to be "articulated," French Finance Minister Christine Lagarde said the ministers "concluded that all avenues deserved to be considered. It's certainly an intelligent proposal but the impact and its application have to be measured, not only in terms of record profits but also in terms of (the impact on) investment," she said. Luxembourg Finance Minister Jean-Claude Juncker, who chairs regular meetings of eurozone finance ministers, said that "all ideas should be studied."

EU finance ministers are considering a range of measures to help consumers cope with record oil and food prices, which are due to be submitted to the bloc's leaders for discussion at a June 19-20 summit in Brussels.

Lagarde claimed broad support among her counterparts for introducing more transparency into oil markets by publishing weekly oil stocks data, as is already done in the U.S. and Japan.

Despite growing pressure to act, the ministers ruled out short-term tax breaks for consumers as a way of providing relief. "In the short run, we don't see any particular reason why we should take any tax measures to this end," said Slovenian Finance Minister Andrej Bajuk after chairing the meeting. Instead, the ministers agreed that any measures taken should "be targeted especially to alleviate the pressure on low-income families," said Bajuk, whose country holds the EU's rotating presidency.

Facing blockades of French ports by striking fishermen, French President Nicolas Sarkozy suggested last week that VAT on fuel could be suspended when prices go too high, but EU finance ministers have largely played down that idea.

With oil trading at all-time highs in May, protests have broken out across Europe recently as inflation snapped back to a record 3.6% after easing to 3.3% in April.

Copyright Agence France-Presse, 2008

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