What is windfall tax?
- A windfall tax is a tax levied by governments against certain industries when economic conditions allow those industries to experience significantly above-average profits.
- Windfall taxes are primarily levied on companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.
- The purpose is to redistribute excess profits in one area to raise funds for the greater social good; however, this can be a contentious ideal.
- A windfall tax can be a surtax imposed by governments on businesses or economic sectors that have benefited from economic expansion.
- Some individual taxes—such as inheritance tax or taxes on lottery or game-show winnings—can also be construed as a windfall tax.
Syllabus: Prelims