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Plan aims to raise $3.4 bln next year

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Bill must still clear upper house Senate

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Energy firms angers, EPH shifts activities

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Proceeds to fund govt's energy crisis measures

By Jason Hovet and Jan Lopatka

PRAGUE, Nov 4 (Reuters) - The Czech lower house of parliament approved on Friday a steep 60% windfall tax on energy firms and banks, aiming to raise $3.4 billion next year from profits deemed excessive to fund help for people and firms hit by soaring electricity and gas prices.

Power prices in Europe have risen sharply since Russia's invasion of Ukraine and reductions in Russian gas supplies.

The centre-right government in Prague is looking to tax extra profits from energy groups such as majority state-owned utility CEZ CEZP.PR , and other energy traders, miners, oil refiners, wholesale fuel traders and from large banks.

The plan angered the affected sectors and prompted one major energy firm to announce it was moving trading activities abroad.

The tax, similar to those imposed by other European countries, will apply for three years from 2023. The bill must still win Senate approval.

The Czech tax goes beyond an agreed European Union regulation as it includes electricity producers, which will already be affected by EU-wide price caps on wholesale electricity prices, and on banks.

The tax applies to profits exceeding 120% of the 2018-2021 average and comes on top of a 19% corporate tax rate.

The government aims to raise around 85 billion crowns ($3.40 billion), or about 1.2% of gross domestic product, next year alone through advance tax payments, and smaller sums in the following two years.

Even with this extra revenue, the government expects a central state budget deficit of around 4% of GDP next year.

Germany and Italy have also initiated windfall taxes, with the latter slapping a 25% tax on energy groups. Britain's government is considering a plan to extend windfall taxes on oil and gas companies' profits.

Hungary has already gone after windfall income of banks and energy companies.

The Czech tax will mainly hit CEZ, as well as oil refiner ORLEN Unipetrol PKN.WA , which has warned it could hurt its investments.

The tax also affects the six largest Czech banks - CSOB KBC.BR , Ceska Sporitelna ERST.VI , Komercni Banka BKOM.PR , UniCredit CRDI.MI , Raiffeisenbank and MONETA MONET.PR .

FIRMS ANGERED

Electricity producers and coal miners to be affected include privately-held EPH and Sev.en Energy.

Privately-held EPH said the decision to include revenue from trade in foreign commodities was "absolutely nonsensical". It said it would move its commodity trading - with an expected volume of over 500 billion euros this year - abroad.

"Our European trading will develop in another jurisdiction, the state budget will lose billions in revenue and the Czech Republic will lose economic activity with extraordinarily high added value," EPH Communications Director Daniel Castvaj said.

Sev.en said the "unprecedented" tax would "take away money from the only firms that are able to invest in new power and heating plants".

Shares in CEZ and banks were up on Friday but have fallen in recent months, with CEZ down 34% at 812 crowns from June's 13-year high.

CEZ has forecast its adjusted net profit to soar threefold this year to 60-65 billion crowns ($2.60 billion).

Milan Lavicka, an equity analyst with J&T Banka, said CEZ would take the biggest hit, adding: "The impact for banks is not so bad because the windfall profits are not so high in the banking sector."

Komercni Banka reported a 34% year-on-year rise in third-quarter net profit on Friday. MONETA has estimated the impact of the tax at 2 billion euros in 2023-2025. ($1 = 25.0010 Czech crowns)
Reporting by Jason Hovet and Jan Lopatka; Editing by Emelia Sithole-Matarise, Alison Williams and Gareth Jones