Tax energy companies' profits to help with cost of living crisis, says think-tank 1 month ago

Tax energy companies' profits to help with cost of living crisis, says think-tank

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Energy companies should be taxed on their profits in order to generate money that could go towards tackling the rising cost of living crisis in Ireland, according to a major Dublin-based think-tank.

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That's the argument put forward by TASC, which focuses on the potential for social change in the country. Per the organisation's latest inequality report, income equality in Ireland has fallen over the last 25 years, with the cost of living hitting the poorest individuals in Ireland the hardest.

"As society has emerged from Covid, so it has happened that another shock has beset Ireland," notes the report's introduction.

"This time, it has been more economic in nature as opposed to a health crisis. Inflation has re-emerged as a global phenomenon. Prices are increasing at a rate not seen in over 50 years. As with Covid and the lockdown, it affects all in society, though not all equally. Moreover, it is ongoing and may be here to stay for some time."

One way to address the problem? Urge energy companies to contribute. A TASC spokesperson suggests that the impact of the cost of living issue as pertains to the profits of energy providers to the Irish market is currently unknown.

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"What is known is that the earnings of energy companies tend to track energy prices. Globally and in Europe, energy stocks have soared, and it is likely that the earnings of Irish energy providers have done well, too. It could be that as Ireland is highly dependent on energy imports, Irish energy companies have done less well compared to those that have direct access to energy supplies.

"The government should investigate whether this is the case and potentially compel energy companies to contribute to the cost of living crisis."

The TASC report cites the example of Italy, where a tax of 25% on excess profits generated by energy companies has been announced.

"The tax has been used to fund temporary reductions in energy prices. Similar measures could be pursued here. An advantage of this measure over, say, price regulation is its precision. It targets excess profits and the proceeds can deployed as policymakers choose.

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"An alternative measure could be to temporarily regulate energy prices. This could be done by increasing prices according to energy usage, as is done in the case of water. While energy use does not perfectly correlate with income, higher-income households tend to consume more energy.

"Aside from being progressive, the advantage of such an approach over broad subsidies to energy use is that it penalises high energy consumption," the report continues. "The disadvantage compared to taxation of excess profits is that it is a less precise instrument."

Ireland's cost of living issue shows no signs of slowing down. Earlier this week, it was revealed that residential property prices have increased by 15.2% in the 12 months leading up to March of 2022.

Challenged by Sinn Féin's Pearse Doherty in Dáil Éireann on Thursday regarding the cost of living crisis, Tánaiste Leo Varadkar took umbrage with his counterpart, stating that Doherty hadn't acknowledged the work that the Government is currently undertaking towards addressing the problem.

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