Windfall Tax

Context:

The government recently has hiked the windfall profit tax levied on domestically produced crude oil and exports of diesel and aviation turbine fuel (ATF).

About Windfall Tax:

The term “Windfall” describes a sudden and significant increase in profits.
Under it, a one-time tax imposed on businesses that are thought to have made excessively high profits, typically due to unusually favorable market conditions.
Utility: Governments use them to increase their tax revenue in a given year by retroactively raising taxes on businesses or industries that received the unanticipated Windfall.

Reason for imposing Windfall Tax on Energy Firms:

Energy firms are getting much more money for their oil and gas than they were previously, initially because of rising demand after Covid restrictions were lifted, and then because Russia’s invasion of Ukraine raised energy prices.

News Source: The Hindu, BBC.com

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