What happened
Mighty oil and gas giant ExxonMobil (XOM -2.78%) wasn't too strong on the stock exchange Wednesday. Investors got a stark reminder that their company might be on the hook for big tax bills, and this concern helped drive its share price down by almost 2% on the day.
So what
ExxonMobil is suing the European Union (E.U.) to block the implementation of a temporary windfall tax. The 27-country E.U. recently imposed the measure, citing concerns about what it deems the excessive profits booked by energy companies in the wake of the war in Ukraine. The tax is to be applied to such companies' operations in 2022 and 2023.
ExxonMobil is suing on the grounds that the E.U. exceeded its legal authority by introducing the tax. Reuters quoted company spokesperson Casey Norton characterizing it as "counterproductive" and arguing that it discourages investments and negatively affects investor morale. He hinted that ExxonMobil, a sprawling business with operations around the world, might reconsider large investments in Europe's energy sector.
Oil and gas companies have come under fire for what many regulators and consumer advocates consider to be unfairly high pricing. Critics have accused them of using the war as an excuse to boost their prices.
Now what
Of course, ExxonMobil feels the need to do whatever it can to protect its profits. So the lawsuit isn't really a surprise. However, it's a reminder that the company is potentially facing an oversized tax bill in both those years. Also, the success rate of even the largest companies suing governments is not high -- and the E.U. is a combination of nearly 30 of those entities.
