Windfall tax targeting energy companies will not be enacted until autumn

New laws to bring in windfall tax measures targeting the “super profits” of energy companies will not be fully enacted until the autumn, about a year after the European Union gave the go-ahead for such measures.

The Government has defended the length of time it has taken to develop the legislation, highlighting its complexity and arguing that the speed with which it is being done is “unprecedented”.

It also said that the measures would be retrospective so the revenues they would generate would not be affected by a decision to split the legislation into two Bills.

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Speaking in advance of a Cabinet meeting, Taoiseach Leo Varadkar said the legislation was being split “so that we can get it done quicker”.

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He said the windfall tax measures “will allow us to generate a couple of hundred million euro in additional taxation, which we can then use and ringfence to help families with the very high cost of energy at the moment”.

The current estimate for how much the windfall gains measures will bring in for the exchequer is between €280 million and €600 million.

The Russian invasion of Ukraine in February 2022 sent energy costs soaring, contributing to a cost-of-living crisis for households.

Government officials have been evaluating the potential for a proposed windfall tax on energy companies as far back as April 2022.

It would be October before the European Commission approved the EU regulations that are the foundation of the legislation being developed in Ireland.

Minister for the Environment Eamon Ryan received Cabinet approval on Tuesday to divide the proposed Windfall Gains Bill into two separate Bills.

A Department of the Environment statement said that the first Bill would be aimed at ensuring the collection of the temporary solidarity contribution (TSC) from large gas and oil producers proceeds faster. This is expected to be enacted before the summer recess.

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The second Bill – to bring in a cap on market revenues for electricity generators – is to be published before the Dáil break and enacted in the autumn.

The statement said: “The decision to split the Bill into two parts will not affect the revenue due to the exchequer, as both elements will be applied retrospectively.”

The TSC will apply for 2022 and 2023 while the cap on market revenues of some generators – such as wind, solar and oil – in the electricity sector will apply for the period December 2022 to June 2023.

On the length of time it has taken to bring in windfall tax measures, the department said: “This is a complex piece of legislation. It introduces two novel measures to collect windfall gains in the fossil fuel and electricity generators sectors.”

The measures are said to interact extensively with existing legislation and there was a need for engagement with the Office of Parliamentary Counsel, the Revenue Commissioners, Department of Finance, Commission for Regulation of Utilities and EirGrid – “to fully work through these complex issues”.

There has been “extensive stakeholder engagement” since the European Commission approved the EU regulations used for the legislation and the department also said “there is a legislative process to adhere to”.

Its statement added: “As such, to progress two very detailed and complex pieces of legislation through the policy and legislative process in a legally robust manner in a number of months is unprecedented.”