Taxing windfall profits in the energy sector

In this paper, we calculate the excess profits of energy and fossil fuel companies in the EU during the energy crisis on 2022-2023. A windfall tax on these profits was adopted, which we find could have generated EUR 73.8 billion, nearly three times the officially reported collection. We document evidence for an avoidance response by large multinationals shifting profits to jurisdictions where the windfall profits tax was not in force. Using Czech country-by-country reporting data, we calculate the potential revenue of a permanent extension of the excess profits tax under different scenarios.