The government’s constant interventions—some justified, some crude and clumsy—in various markets must have the numerous liberals in its ranks feeling awkward at best. If the first taxation on excess refinery profits in 2023 (on the profits they made in 2022) made some sense in the context of European trends at the time and the sharp increase in refinery profit margins, the appropriateness of the extraordinary taxation of 2024 (on 2023 profits) is harder to explain, given the low price of oil internationally and the domestic price at the pump. The inclusion of refined oil exports in the tax on excess profits makes any rationale even harder to discern. Because it looked a lot like a nation with a huge trade deficit punishing its exporters by changing the rules of the game—rules whose observance is a fundamental component of capitalism.
In the electricity market, things were more clearly defined for a long time. The market more or less endorsed the mechanism in force between August 2022 and the end of 2023 whose primary revenue came from the windfall tax on power companies’ profits, given that it kept the supply chain on its feet. However, exactly one year ago, the government made a promise: the market needed strengthening. The green tariff was launched, millions of consumers found out what they were paying, which company was the cheapest: the market started to function. Indeed, wholesale prices fell so far at times, the power producers were actually making a loss. But at the first hurdle, when prices started to go up last summer, we forgot the market and went back to state-funded subsidies. And that wasn’t all: we also reinstated the tax burden on producers. Now the government is preparing to do the same thing again, with the announcement due next Friday.
The Prime Minister himself last week stressed: “We don’t like extraordinary measures as a rule”. But the rumors about yet another extraordinary tax spread from the energy sector to the banks, even though everyone knows that their last capital injection in 2016 obliges them to declare increased profits every year in order to reduce the deferred tax they were granted in lieu of capital. What’s more, if this new extraordinary tax ends up being imposed, it will change the rules of the game for those who aligned themselves just a few months ago with the public sector’s disinvestment from the banks. Nor is there any discussion on the impact all this will have on the investment climate, or the Athens Stock Exchange, whose performance has been poor at best for weeks now on the back of all this.
That the government will actually impose additional taxation on the banks is made more likely by the fact that Sanchez did just that in Spain–even though many other aspects of his economic program have come in for criticism from the Greek government. He went on to repeat the exercise last year, too, albeit at lower rates. What shall we look at next? The interventions in the housing market, or the massive reductions in excise duties to which Greece is adamantly opposed?
The Mitsotakis government found the courage at the start of its term in office to reduce the corporate tax rate to the lowest levels the country had ever seen. Over the last two years, it seems to have had repeated second thoughts about a measure that has boosted growth, as well as the country’s investment image and public revenues.
