Romanian Govt. unveils 60% profits tax for entire oil and gas industry

Romania’s Government adopted on December 28 an emergency ordinance that sets a new tax on the “super profits” reported by oil and gas companies operating in the country. Under this ordinance, the Romanian state will get 60% of the net profits of oil and gas companies that are above 120% of their average net profits recorded between 2018 and 2021.

The primary target of this new tax is OMV Petrom (SNP), the biggest oil and gas group in Romania, 51% owned by the Austrian group OMV. The Romanian state also holds a 20% stake in the company. Gas producer Romgaz (SNG), which is controlled by the Romanian state, will also be impacted by the new tax.

Both companies are listed on the Bucharest Stock Exchange and their minority shareholders include foreign and local investment funds, pension funds and individual investors. The shares of OMV Petrom dropped by 8% in two days after the draft ordinance was first announced. Romgaz’s shares also declined by 6.1%. As a result, the Bucharest Stock Exchange’s flagship index - BET - lost 4.65% in just two days.

Govt. says most EU states impose similar “solidarity contributions”

The Government motivated the new tax through the need to address the “problem of high energy prices” according to a regulation approved by the EU Council on October 6, 2022.

“The main reason is, on the one hand, to protect vulnerable categories of the population against the effects of rising energy prices and, on the other hand, the main objective of the Romanian Government, including the one stipulated in the European regulation, is to ensure the financing of investments in strategic energy projects, especially those from renewable sources,” stated Mihai Diaconu, a state secretary in the Finance Ministry, after the Government meeting on December 28.

He pointed out to other EU states that adopted similar “solidarity contributions” targeting the “super-profits” reported by energy companies.

“The Netherlands, France, Germany, for example, have imposed a 33% share of these extra-profits or, let's call them, super-profits of the companies active in the field. Ireland, too, transposed the regulation and goes for a tax rate of 75%, Italy chose 50% of profits for the year 2023, the Czech Republic, a state comparable to Romania, we say, imposed a tax rate of 60%, Greece - 90%. Therefore, all of Europe demands this solidarity contribution and Romania must align itself, as a member of the European Union, with this regulation,” he explained.