Czech government parties agree on windfall tax ahead of vote

Czech ruling coalition parties agreed on Friday on the final form of the government's planned windfall taxes, Finance Minister Zbynek Stanjura said, without providing further details. The parties had been debating final parameters of the tax on excessive profits in the energy and banking sectors, aimed at financing measures to ease the impact of soaring energy prices, before a final vote due in parliament later on Friday.

Czech ruling coalition parties agreed on Friday on the final form of the government's planned windfall taxes, Finance Minister Zbynek Stanjura said, without providing further details.

The parties had been debating final parameters of the tax on excessive profits in the energy and banking sectors, aimed at financing measures to ease the impact of soaring energy prices, before a final vote due in parliament later on Friday. The agreement means that the windfall tax rate will be 60% next year and most likely also in 2024 and 2025, after a coalition partner pulled their proposal to lower the rate to 40% in the following two years, CTK reported.

The government aims to raise around 85 billion crowns ($3.40 billion), or about 1.2% of gross domestic product, from the tax next year. It will apply to profits exceeding 120% of the 2018-2021 average and be applied on top of the standard 19% corporate tax rate.

It will apply mainly to the large energy production and trading firms, especially the majority state-owned CEZ , as well as refinery ORLEN Unipetrol and the country's largest six banks: CSOB, Ceska Sporitelna , Komercni Banka, UniCredit, Raiffeisenbank and MONETA. The Czech tax goes beyond European Union regulation as it includes electricity producers, which will already be affected by price caps on wholesale electricity prices, and also banks. It is also planned for three years and not just for 2022-2023 as set in the EU agreement.

($1 = 25.0010 Czech crowns)