Czech windfall tax: Babiš eyes banks, defense and energy firms

The Czech government wants to extend the windfall tax, originally conceived for oil refineries, to other sectors. Prime Minister Andrej Babiš discussed additional taxation of the sector with representatives of the largest banks on Wednesday morning, Seznam Zprávy Byznys reports, citing its sources. The cabinet will take up the sector tax on Monday, and members of parliament will consider it at an extraordinary session of the Chamber of Deputies on Friday of next week.

Which sectors are at risk

The government plans to widen the law through amendments. Besides banks, which the government believes have posted high profits in recent years, sources say defense companies, energy and digital companies are also in play. Which firms exactly, and what share of each sector, will be taxed remains unclear: the parameters are still under discussion.

Each sector has its own source of excess income. Banks benefited from interest rates, energy firms and refineries from commodity price swings, and defense companies from rising defense spending. They are also attractive targets for the government because a tax on extraordinary profits could bring significant sums into the budget.

Been there: a tax that raised almost nothing

A tax like this is nothing new for banks. A windfall tax applied to them in 2023–2025. The state expected to collect more than 30 billion crowns from the six largest banks, but over the entire period the tax was in force, the banks paid less than one billion.

The debate over a bank tax was revived in early October by Finance Minister Alena Schillerová (ANO). On social media she criticized rising mortgage costs, with the average offered rate approaching six percent in October. In her words, “whoever pulls the string too tight shouldn’t be surprised when it snaps,” and it would be a pity to return to a debate that had been considered closed.

What the bankers say

Tomáš Spurný, head of Moneta Bank, has already acknowledged that a bank tax is possible. At the same time, he warned that in any form such a tax would force the parent banking groups to restrict access to capital for Czech banks, which would earn less because of the heavier tax burden. According to him, capital could flow to countries such as Hungary or Poland, meaning fewer loans and higher prices for mortgages and consumer credit.

Because of worse financing conditions for Czech companies, Spurný believes the overall long-term effect of the sector tax on the state budget would be zero or negative. He expects the same from the recently announced taxation of refineries: Orlen is an international group with other investment options.

Around Prague guide on the topic: A mortgage in Czechia for foreigners: who qualifies and how much of your own money you need

Around Prague, based on reporting by seznamzpravy.cz