The French and German governments have chosen an odd way to stray from the European pack. As other major economies slap a windfall tax on power groups and other companies coining it from food and energy inflation, the euro zone’s two largest powers remain noticeable refuseniks. But they may not benefit as much as they hope from the refurbishing of their crisis-era business-friendly credentials.

The UK, Italy, and Spain have, in different ways and for different industries, requested a special contribution from companies that thrived on higher energy prices, the post-pandemic recovery or higher interest rates.

Rationale behind

Paris and Berlin have different reasons to demur. France, because President Emmanuel Macron was re-elected in May on a platform not to raise taxes. Germany, because Finance Minister Christian Lindner, a free market liberal, says he does not see the economic rationale for such a tax.

Even though windfall taxes are controversial, starting with the touchy definition of what exactly constitutes a “windfall” profit, the massive amount of extra spending that governments must undertake to deal with the ongoing crisis would justify such a move. It can be financed either by tax or by more borrowing.

Low-debt Germany could afford to borrow more, in spite of Lindner’s obsession with deficits. It would be more difficult to do so for high-debt France, which seems to prefer pressuring companies to do the right thing — for example, “asking” TotalEnergies to lower the price of petrol at the pump.

Wooing investors

Both Lindner and his French colleague Bruno Le Maire have hinted that taxing utilities or oil companies would compromise their efforts to make their respective countries choice destinations for global investments. In reality, industry threats of shrinking investments if such taxes are imposed must be taken with a pinch of salt.

That is particularly true of direct investments. Companies taking part in the exploration of Britain’s North Sea won’t find overnight alternative uses for their capital in Germany or France. Besides, the UK’s overall tax burden, at around 37 per cent of GDP, remains much below that of France (51 per cent) or Germany (47 per cent), according to the International Monetary Fund.

With a major global economic downturn looming next year, international investors might be better off assessing whether individual governments’ responses to the crisis will help fend off a major economic meltdown. Maybe by starting to look at how they spend the money, not so much how they raise it.