Where does the notion of “superprofit” come from and what does it really mean?
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Faced with the exceptional profits recorded by the large companies in the energy sector on the fringes of the war in Ukraine, deputies from all sides have been calling this summer for the taxation of “superprofits”. The Socialist Party and La France insoumise relaunched the idea of a referendum on the subject at the start of the school year.
In an interview given to Parisian on August 27, the Prime Minister, Elisabeth Borne, affirms not ” close the door “ to this proposal, decried by the Medef, the main employers’ union. It is not the first time in history that the idea of taxing superprofits has emerged, but each time the question also arises of their definition and the effectiveness of the method adopted.
What the term means
The notion of superprofit refers to exceptional profits made by a windfall effect. It is an enrichment considered higher than normal and due to external circumstances “which make money for a company without it having changed anything in its way of operating or in its strategic decisions”, summarizes the economist Mireille Chiroleu-Assouline, professor at the University Paris I-Panthéon Sorbonne and at the Paris School of Economics. But the term does not belong to scientific vocabulary, economists preferring the use of the notion of rent.
The case of TotalEnergies crystallizes the attention, because its profits have climbed due to the surge in oil prices linked to the war in Ukraine. In the first half of 2022, the multinational recorded a net profit of 18.7 billion dollars (18.3 billion euros) – three times more than the previous year at the same time. For the whole of 2021, TotalEnergies already showed a record result of $16 billion.
If these exceptional profits are considered undeserved by part of public opinion, the question of their redistribution arises. It is in this respect that the subject is very political. During the summer, Renaissance deputies, but also from the Rassemblement national, from the center and from Nupes, asked for the introduction of a surcharge on these benefits.
“This idea is part of a broader debate on the constraints that are imposed on everyone, and the efforts that everyone makes, in a period of crisis, analysis Mireille Chiroleu-Assouline. Superprofit taxation is a form of protest against the fact that citizens are subject to price increases while very wealthy individuals or companies take advantage of the situation. »
A recurrent debate since the First World War
The origin of the word goes back to the writings of the philosopher Karl Marx, in the XIXe century: he designates by “superprofit” an unusual enrichment, synonymous with overexploitation on the part of any type of capitalist enterprise. But the current meaning appears after the First World War to designate the “war profiteers”, particularly in the armament sector. As early as 1916, the socialist government of Aristide Briand created the “extraordinary contribution on war profits”carried out by certain companies having a contract with the State between the start of the war, on 1er August 1914, and eighteen months after the conflict. In practice, this tax is proving difficult to collect, as companies are recalcitrant.
The oil shocks of the 1970s and, to a lesser extent, of 2005 brought back the notion of superprofit, the sudden increase in energy prices resulting in “record profits” for companies in the sector. Different taxes are considered. In 1980, the US Senate voted in favor of a 70% tax on the additional profits made by large companies on oil discovered before 1979 and sold above 13 dollars per oil (here told by The world).
The opportunity for a special tax on superprofits resurfaced first timidly at the time of the health crisis linked to Covid-19, then more clearly after the war in Ukraine, targeting companies in the energy and transport sectors. Several countries have already launched reforms, such as Italy in March and the United Kingdom in May. The methods differ according to the legislative framework and the targeted objectives.
A fuzzy basis for calculating a surcharge
The lack of a precise definition of superprofits complicates the creation of a tax. First difficulty, to find a consensus around a method of calculation and a certain threshold of profits to spare the most modest companies. “The least bad solution is to look at the profitability rate of companies and to achieve an average of the last five years. We can consider that profits above this average are superprofits.advances the economist Jacques Percebois, professor emeritus at the University of Montpellier.
The pitfalls can then be of a legal nature:
- The risk of tax inequality: if the tax concerns only one sector of activity, such as energy, some companies may have to pay while others do not, despite similar characteristics.
- The question of profits made abroad: most of the groups targeted are multinationals, which make and declare most of their profits outside France. For Sandra Hazan, tax lawyer at Dentons, “it is very difficult to derogate from this principle of territoriality of corporation tax. It is an attack on the sovereignty of other States, to remove from them taxable material on their own territory.. To compensate, a possible solution, according to her: provide that any company whose profits at the global level exceed a defined sum is subject to a higher tax on its French results.
Finally, and this is one of the arguments of the opponents of such a tax, there is the question of its effectiveness. In other words, the risk that the revenue it brings in will be less than its potential perverse effects. “Companies could say that since they pay a surcharge, they are cleared of the rest, have no reason to help consumers, employees, nor to invest a lot”, lists Jacques Percebois. According to Sandra Hazan, an additional tax will be “necessarily passed on to the consumer”. The lawyer says she is more in favor of a tax on dividends received by shareholders, which “would force companies to reinvest so that the money stays in the economic circuit”.
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