Windfall Tax

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