WINDFALL TAX
WINDFALL TAX
IN NEWS –
- Recently, the central government has reduced the windfall taxes on domestically produced crude oil. Windfall tax came into being in the 1970s with the intent to tax the profit of companies generating huge revenue due to an unprecedented event.
- However, this tax system has been debated since its initiation.
- The recent windfall tax on crude oil this year is making headlines. However, looking into a dramatic rise in their yearly profit, Government needs to levy a windfall tax on their income.
ABOUT WINDFALL TAX
- A Windfall Tax is a type of tax that is levied on companies or individuals who have unexpectedly and/or dramatically gained large profits, often due to external factors beyond their control.
- It is commonly levied on industries such as oil, gas, and mining.
- The purpose is to capture a portion of the extraordinary profits that companies make and redistribute it for public good.
- It is a strategic measure to promote transparency and fairness and responsible economic practices in the energy industry.
- This hike will impact the profits of oil companies operating in India and reduce their earnings.
- India first implemented windfall profit taxes on 1st July 2022, aligning with other countries that tax excessive profits of energy companies.
- The tax rates are reassessed every 2 weeks, taking into account international crude prices from the preceding fortnight.