Windfall tax on oil rejected

European Union finance ministers rejected a proposal to impose a windfall tax on oil companies benefiting from record prices that are cutting consumers' purchasing power.

The price of oil has jumped 38 per cent in the past year, reaching a record US$75.35 last month. That's pushing up fuel bills for households throughout Europe and eating into their ability to spend.

While Luxembourg Prime and Finance Minister Jean-Claude Juncker said on Wednesday a levy on oil companies should be considered, ministers from the Netherlands, Greece and Austria yesterday dismissed such a policy as they arrived for talks in Brussels.

"We already tax oil," Dutch Finance Minister Gerrit Zalm said. "If you tax companies when they make high profits, what do you do when they make low profits? You would then be giving them a subsidy when the oil price is low."

"There are other ways to deal with the uncertainties of the oil market," said Greek Finance Minister George Alogoskoufis.

The world's five largest oil companies earned about US$29 billion ($45.3 billion) in the first quarter, or US$4.46 for every person on the planet. Shell, Europe's second-largest oil company, yesterday reported a 3 per cent rise in first-quarter profit to US$6.89 billion. Total, No 3 in Europe, yesterday announced a 16 per cent gain to €3.38 billion ($6.7 billion).

Oil companies "appear to be the big gainers" and that is "starting to irritate parts of our public opinion", Juncker said.

EU tax proposals often founder on the need for unanimity among the 25 countries. Past tax plans that ended up being shelved include a bond-withholding tax that Britain vetoed in the 1990s and a French proposal last year for an airline-ticket tax that found few backers.

- BLOOMBERG