What is a windfall tax?
- A windfall tax is a higher tax rate levied by governments against certain industries when economic conditions allow those industries to experience above-average profits.
- So when any industry, in this case-oil and gas- benefits from an event or a one-off external situation ( the Russia-Ukraine war) that they were not responsible for and make sudden profits, these profits are taxed separately, over and above the normal taxes that these companies pay to the governments.
Why in News?
- The Central Government has reduced to less than half the windfall tax on crude oil to ₹4,900 ($60.34) per tonne.
- India first imposed windfall profit taxes on July 1, joining a growing number of nations that tax super normal profits of energy companies.