Taxing profits, eh?

Kwasi Kwarteng has refused to rule out a windfall tax on companies profiteering from spiralling gas prices as two more energy providers went bust amid fears of a wave of corporate collapses.

So, prices are rising because supply has risen less than demand. People make profits by supplying. So, by taxing profits we reduce that urge to increase supply. Which is where we came in, right, with not enough supply being added?

14 thoughts on “Taxing profits, eh?”

  1. I don’t suppose Kwasi Kwarteng would get very far with that argument in cabinet or in public discourse. It might be economically sound but politically difficult. So which way will the politician go?

  2. ‘Refused to rule out’ is not the same as ‘we are going to do it’

    He has to deal with drooling graiuniad readers and doesn’t want to give them easy (although stupid) lines of attack

  3. So he’s going after Gazprom. Good luck with that. Meanwhile, some people might like to cook and heat their homes this winter.

  4. ‘Refused to rule out’ is not the same as ‘we are going to do it’

    Generally with this government, ruling something out is a precursor to doing it, so you might be right.

  5. So which way will the politician go?

    Economists have the Supply/Demand curves. Politicians have the Personal Gain/Fucking Things Up curves.

    So the way the politicians will go will be whatever action maximises their personal gain, and causes the most damage to the rest of us. I think this is a corollary to my personal First Law of Politics (“If you really want to fuck something up, put a government in charge”): causing the most damage gives the politician the cover to swing back round and line their pockets again while pretending to “fix” what they broke last time. Rinse and repeat.

  6. So introduce huge uncertainty on taxation in order to dissuade new suppliers from bringing gas to the market. My cat is smarter than that.

  7. You have to admire Vlad’s operation

    He has escaped (again)

    Somehow its Boris’s fault

    Maybe the ecoloons will share some responsibility (fat chance)

  8. jgh, it’s a windfall if your company stays alive through cautious policies. Of course such companies must be punished.

  9. A windfall tax on UK gas distribution companies will yield 50% of the amount of the windfall – so, net of collection costs, approximately 5p!
    The profiteering is mostly, but not entirely, by Gazprom, but Norway’s Statoil must also be coining it. Any company producing gas in the UK sectors of the North Sea, English Channel, Irish Sea and North Atlantic is already subject to windfall taxation in the form of PRT.
    Kwasi Karteng was sensible in stonewalling rather than trying to explain to a questioner who neither wished to listen to a complicated explanation nor was capable of understanding all the details.

  10. He could abolish the anti-fracking regs and offer tax breaks instead of windfall taxes to any companies that get to work immediately.

    Ok, I’m joking.

  11. Meanwhile the Italian government has instead decided a temporary (3 month) tax reduction of eur3bn on fuel. Strange world we live in where the UK government are crazy commies and the Italian one is vaguely competent and rational

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