Czech lower house backs refinery windfall tax at first reading

The Chamber of Deputies today gave preliminary backing to the government’s proposal to introduce a windfall tax on refineries. The government says the tax is prompted by rising refinery margins as a result of conditions on the global oil market. It will apply only to large corporations and is likely to affect just two businesses in Czechia: the refineries in Kralupy nad Vltavou and Litvínov. Both are owned by Orlen Unipetrol. The bill survived opposition motions to reject it and to send it back to the government. It will now be considered by the Chamber’s budget committee.

The tax will apply for this year and next. It will be levied on margins above the 2025 level. The finance ministry estimates that the tax will bring in around 5.5 billion crowns for the state budget this year alone. Revenue for next year can be estimated more precisely only in 2027, depending on price developments. The opposition warns that the new tax will apply retroactively. It also points out that the tax will affect only one entity in Czechia.

Finance Minister Alena Schillerová (ANO) told MPs that the tax was not aimed at a single company. “The purpose of this amendment is to impose an extraordinary tax in response to the sharp rise in prices of refinery products,” she told MPs. “Revenue from this tax will help partially offset state budget expenditure incurred in connection with rising fuel prices,” she added. The tax revenue will go exclusively to the state budget; unlike other taxes, it will not be shared with regions and municipalities.

The tax will apply to companies with total annual revenue of at least two billion crowns and annual revenue from refining activities of at least 50 million crowns. Tax bases for tax periods beginning in 2026 and 2027 will be compared with the tax base for the period beginning in 2025. The tax base will be calculated as the difference between revenue from sales of a company’s own products and the cost of crude oil consumed.

On Monday, the Confederation of Industry and Transport called on the government to abandon the plan or at least soften the tax parameters. The confederation welcomed the government’s efforts to limit the impact of rising diesel prices, for example by cutting excise duty. However, it rejected the introduction of any sector-specific taxes, which it says distort a fair market environment. Prime Minister Andrej Babiš (ANO), responding to the confederation’s position on Monday, called the introduction of the tax the right move. “This step is exceptionally necessary and responsible,” the finance minister stressed today.

To cover the costs of capping gas and electricity prices, the previous government also introduced a windfall tax in 2022 targeting energy, oil and gas, and mining companies, as well as banks. Companies paid the tax for 2023 to 2025. They paid the state around 114 billion crowns in total, just a fraction of the amount originally expected. The largest share came from the semi-state-owned energy company ČEZ, which paid more than 30 billion crowns each year.

Among other measures, the Chamber of Deputies rejected a proposal by ODS parliamentary group chairman Marek Benda to refer the bill to the foreign affairs committee as well. Benda argued that the refineries are owned by the Polish state, and that the committee should therefore consider the matter in relation to the neighboring country.