Windfall tax for coal companies. We check what tax JSW and Bogdanka will pay

For several months, there has been a quandary for the coal companies listed on the Warsaw Stock Exchange, regarding the unknown form of the possible tax on extraordinary profits. So far, there have been often conflicting messages in this regard. Yesterday, on July 10, 2023, the government finally formally presented its intentions in this matter.

In a statement issued after the cabinet meeting, the Prime Minister’s Chancellery informed that excess income will be charged with a 33% contribution. This additional tax is to cover entities involved in coal mining, production or trading. These conditions are mainly fulfilled by Bogdanka and partly by JSW. The government wants to allocate the additional funds obtained in this way to partially fund electricity rate cuts for sensitive households and entities.

See also: Government wants coal companies to pay a solidarity contribution; Income surplus was charged at 33 percent.

Carbon tax for JSW and Bogdanka

The extraordinary income contribution will cover “extraordinary earnings obtained in the year 2022”. The communication explains that excess income is defined as income that exceeds 120% of the average income earned in the past four years.

In 2018-2021, Bogdanka amassed net profits of PLN 53.8 million, PLN 308.7 million, PLN 73 million and PLN 288.3 million, respectively. In contrast, the net profit in 2022 amounted to PLN 175 million. These figures show that Bogdanka did not achieve above-average profitability in 2022.

Estimated tax value of JSW on the background of the company’s cash position and its capitalization in WSE

However, the situation in JSW is completely different. It generated combined net profits in 2018-2021, respectively: PLN 1.76 billion, PLN 0.65 billion, PLN 1.55 billion and PLN 0.9 billion. The group’s net profit in 2022 reached a record high of PLN 7.56 billion and was certainly above the average income in recent years. Thus, the “extra” tax could amount to just over PLN 2 billion in the case of the JSW. The company’s board of directors mentioned that amount during its recent earnings conference call, so it shouldn’t come as a surprise. Let us also add that according to the latest balance sheet, there were more than 10 billion PLN in JSW accounts, including money accumulated in the fund for the period of the economic downturn.

See also: JSW is still very profitable and has 9.5 billion PLN. Will the cash go to a windfall tax or dividend?

Questions about the new tax

However, it is still unknown whether the result obtained from the coke production sector will be “subtracted” from the income generated by JSW, and whether this tax will also be applied to the income generated in 2023?

See also: In 2023, the cash generated by JSW may be higher than the company’s current capitalization – according to DM BOŚ’s analysis