Eni hit by 154.5% windfall tax increase

Eni said August 31 that its windfall tax liability had soared by 154.5% following a recalculation by the Italian tax authorities.

The windfall tax payable by Eni was originally pegged at €550mn, but has now risen to around €1.4bn. Eni already paid a 40% down payment against its bill and has now paid a further €340mn to cover the shortfall against its new tax estimate.

Reuters reported August 2 that revenues paid from the new windfall tax into state coffers would be less than anticipated. Italy's 25% tax on energy sector companies was originally projected to raise €10-15bn, but Rome has since written off €9bn from its mid-year income estimate.

Outgoing Italian prime minister Mario Draghi first floated the windfall tax in March, but later increased the rate of tax from 10% to 25% to cover more state payments to Italian citizens, with the country still burdened by significant sovereign debt commitments.

Critics say a windfall tax that absorbs a quarter of incremental revenue is misconceived given fluctuations in wholesale energy costs, particularly downstream, where fuel costs have been rising for the majority of this year. Engie CEO Catherine MacGregor in May told Bloomberg the windfall tax could hinder industry investment, while Edison CEO Nicola Monti has said the charge has a "disproportionate" effect on her business compared with larger firms.

Draghi, however, had committed his government to several subsidies to help Italians combat inflation, backing measures ranging from cash subsidies to energy bill payments, tax credits and local government funding, according to the Financial Times.

Italy will head to the polls on September 25 for a snap general election. Draghi, an independent without party affiliation, who has led coalition government since February 2021, generally positioned himself as a technocrat with a less restrictive approach to government spending than his immediate predecessors.