The excess profits during COVID-19 and their tax revenue potential

The COVID-19 pandemic affected most companies’ profits negatively, but some companies did exceptionally well, recording excess profits during the pandemic. In this paper, we estimate the scale of the excess profits and the tax revenue potential of an excess profits tax, an additional tax levied by governments on companies’ excess profits. To estimate excess profits, we develop a trend-adjusted average earnings methodology. We apply the methodology to firm-level consolidated Orbis data to estimate that large multinational corporations with subsidiaries in the EU generated excess profits of $447 billion in 2020 (42% of their total profits in 2020). Using country-by-country reporting data, we estimate the excess profits arising from each EU member state and find that EU member states could together raise $6 billion with an excess profits tax of 10%.