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ExxonMobil is suing the EU in an effort to force the block to repeal its new windfall tax on oil companies.
A windfall tax is levied on businesses that benefited from something they did not cause. Oil and gas companies are getting a lot more money for their oil and gas than they used to. This is partly because Russia’s invasion of Ukraine has caused supply worries. Exxon however, accuses Brussels of exceeding its legal authority, describing the measure as “counterproductive”.
In October, ExxonMobil reported a quarterly profit of nearly $20 billion. Ursula von der Leyen, the head of the European Commission, said in September that big oil, gas, and coal companies would pay a “crisis contribution” on their higher profits in 2022. A 33% tax was announced for this year’s profits, which were more than 20% higher than the average of the previous three year. In a challenge to the EU’s Luxembourg General Court, Exxon says that the tax makes investor less likely to invest and hurts investor confidence.
EU ministers estimate that they can collect €140 billion from the levies on non-gas electricity producers and suppliers, who are making above-average profits due to the current demand.