(Economy, Current Affairs)
Recent Context:
The government has slashed windfall tax on domestically produced crude oil to ‘nil’ per tonne.
About Windfall Tax:
-A windfall tax is a higher tax rate imposed on certain companies or sectors that have unexpectedly large profits, typically due to external factors rather than their own actions.
– Governments may introduce windfall taxes when certain industries, like oil and gas, benefit disproportionately from events like geopolitical instability, supply shortages, or sudden price spikes.
For example, during periods of rising energy prices, energy companies may see significant profits without increasing their production costs.
–Governments might impose a windfall tax to redistribute some of these unexpected profits back to the public or to fund specific social programs.
-The rationale behind a windfall tax is that the profits are considered “unearned” or excessive in light of the external circumstances, and taxing them helps address economic inequality or fund pressing needs.