EU Excess Profits Tax Ultra Vires?: On the Limits of Article 122 TFEU in EU Tax Policy

Abstract

p class="MsoNormal"Articles 14 et seq. of Regulation (EU) 2022/1854 required all EU Member States to impose a temporary excess profits tax – labelled as a ‘solidarity contribution’ – for certain companies operating in the fossil fuel sector. This development has sparked widespread debate as to whether tax measures can be adopted under the emergency powers of Article 122 (1) TFEU, and if so whether the excess profits tax meets the relevant criteria to qualify as an economic policy emergency measure. The article challenges the predominant view in tax scholarship, pursuant to which Article 122 (1) TFEU is subordinate to other legal bases in the Treaties that specifically address legislative measures of tax harmonization. This notwithstanding, it comes to the conclusion that the excess profits tax has not been conceived as targeted economic policy measure, as required by Article 122 (1) TFEU. It predominantly pursues social policy objectives, and its impact on energy markets and costs is too indirect, too uncertain, and moreover often not effective in the short term. It is moreover argued that EU action was not needed to provide Member States with extra revenues to bolster national budgets in the face of increased spending needs. Finally, an eventual intention of a majority of Member States to ‘Europeanize’ negative economic reverberations of an excess profits taxes, without any apparent attempt to balance this questionable objective with the interests of more investment-friendly Member States, would be contrary to the solidarity requirement of Article 122 (1) TFEU.