June 23. 2024. 12:39

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Slovakia’s Slovnaft says new windfall tax may end domestic fuel production

Oil refinery Slovnaft has taken aim at the 70% windfall tax for 2022-2023 that was signed into law by President Zuzana Čaputová on Wednesday, even though it was previously set at 55% and only for 2022.

The government led by Prime Minister Eduard Heger first agreed to 70% but later lowered the tax to 55% at the end of December, only to raise it again this year. Profits made in 2022 and 2023 will be taxed even though it was previously said that the tax would only apply to 2022 profits.

“We take note of the decision. We are currently analysing the adopted law, and we will consider possible steps,” Slovnaft’s spokesman Anton Molnár said, adding that the Bratislava-based refinery considers the taxation to be a targeted political attack on a long-successful enterprise of strategic importance, which may lead to the end of fuels production in the country.

Slovnaft and its mother company, Hungarian energy giant MOL, already announced they will sue the government. Other companies, including global oil conglomerate Exxon Mobil, are taking the EU and other member states to court over a similar oil tax.

After Russia’s aggression in Ukraine started, the EU introduced an embargo on Russian oil imports and reduced the price of Russian Urals crude oil. However, Slovakia, Hungary and Czechia negotiated an exemption for pipeline oil.

Slovnaft, which relies on oil products now replicating the price of the more expensive British Brent crude, is now producing from cheaper crude but selling its products at higher prices.

Because other companies in the energy sectors are employing similar tactics, the EU has agreed to tax these excessive profits, with the Commission recommending a minimum tax rate of 33%.

The government hopes the new law will bring €700 million to the state treasury.

The leader of the ruling Ordinary People and Independent Personalities party (OĽaNO) and former Prime Minister Igor Matovič wants to use the money to incentivise voters to participate in the upcoming snap elections planned for 30 September. Matovič proposed to give every voter €500.

(Michal Hudec | EURACTIV.sk)