Financial Times: France threatens oil majors with windfall tax: “…French finance minister, has threatened oil majors with a windfall tax on “exceptional” profits unless they cut the price of fuel at the petrol pump and increase investments in renewable energy.”: Friday 9 Sept 2005
By Martin Arnold in Paris
Published: September 9 2005
Thierry Breton, French finance minister, has threatened oil majors with a windfall tax on “exceptional” profits unless they cut the price of fuel at the petrol pump and increase investments in renewable energy.
”We do not exclude the possibility of putting to a vote in parliament an exceptional tax corresponding to an exceptional situation,” Mr Breton said in a television interview on Thursday night. “I hope it doesn’t come to that,” he added. “But in any case we are determined.”
Record profits this year at leading oil groups have attracted widespread criticism in France amid worries about the impact of rising fuel prices on consumer spending. Total of France has been the target for particular criticism after its first-half profits jumped 44 per cent to €6.29bn.
Dominique de Villepin, prime minister, has accused oil majors of not investing enough in refining capacity to address a diesel fuel shortage in Europe. He also promised to return any fuel tax surplus in this year’s budget to low-paid workers and the hardest-hit sectors of the economy.
Mr Breton said he had called a meeting with “all the actors in the oil sector” for Friday September 16. “It is their duty to behave as citizen businesses and make proposals, such as one could imagine them lowering prices at the petrol pump,” said the former France Telecom boss.
The prime minister had been consulted “at length” on the issue and was prepared to introduce a windfall tax on oil companies’ profits in this year’s finance bill if their proposals “do not measure up to the expectations of the French people”, said Mr Breton.
Other possible remedies for oil groups suggested by the finance minister included “investing in a significant way in renewable energy” or in programmes to develop more fuel-efficient cars.
Oil groups could be caught on the back foot by threats of a windfall tax, which would be the first of their kind in France. Thierry Desmarest, chief executive of Total, this week said the government was “reassured” after seeing the French group’s $11bn-$12bn five-year spending plans.
A spokesman for the finance ministry said oil groups “should not just consider their shareholders but all stakeholders”. The government held talks with oil groups last month but was not satisfied with their response. Total shares were unchanged €218.20 in early trading on Friday.
The increased cost of oil has contributed to a slowdown in economic activity in France since the beginning of the year, but the finance ministry is still forecasting that GDP could expand by up to 2 per cent in 2005.
However, it suffered a setback on Friday when Insee, the French statistics agency, said industrial production, including autos, farming, consumer goods and energy, fell 0.9 per cent between June and July. It was surprisingly far below economists forecasts for growth of about 0.3 per cent.
The finance ministry said the July figures did not include strong growth from other sectors of the economy, such as construction, and reflected a traditionally slow time of year. It said growth was still expected to “accelerate” in the third quarter.
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