On November 4, 2022, the Czech Parliament approved a tax on extraordinary profits of energy, petroleum, mining companies and banks. It is to be paid for a period of three years until 2025, its rate will be 60 percent, and the income from this tax is to be used to cover the extraordinary costs that the Czech state will have in connection with setting maximum energy prices and their compensation for the population.
Importantly, this tax will also apply to the foreign profits of the abovementioned companies. For that reason, billionaire Daniel Křetínský’s Energy and Industrial Holding (EPH) decided to move its company EP Commodities (EPC) from the Czech Republic to abroad.
EPC agrees that a part of the profits from high energy prices which are generated in Czech energy companies should be used to partially reduce the negative effects of the energy crisis. However, the approved legislation goes significantly further in the case of trade in energy commodities and should apply not only to the domestic, but also to the foreign profits of the mentioned companies.
EPC is a member of the EPH group, specializing in trading energy commodities as well as transit and storage capacities. The company employs approximately one hundred people and has built its European commodity trading center in Prague, although electricity produced in the Czech Republic accounts for only about one percent of the company’s trading volumes. In 2022, the company should achieve sales of over 500 billion Czech crowns and the expected corporate income tax for 2022 should exceed 1 billion Czech crowns. “Taxing these foreign incomes with the Czech windfall tax is absolutely senseless. We informed the government about the situation, yet it decided not to exempt foreign income from the windfall tax,” informed EPH spokesman Mr. Daniel Častvaj.
Our comment:
Yet another good example, this time from the Czech Republic, of how politicians “value” companies and entrepreneurs who bring income to the state budget which subsequently the politicians are so happy to spend. The proposal still needs to be approved by the Senate, the upper chamber of the Czech parliament, and signed by the president, so it remains to be seen whether the common sense will prevail, the law will be amended and foreign profits will be exempted from taxation, and EPC will not move abroad at the end of the day.
