Windfall Profit Tax

Windfall Profit Tax

What Does Windfall Profit Tax Mean?

A tax levied by governments on certain industries when economic conditions allow those industries to have above-average profits. Windfall taxes are levied primarily on the companies in a targeted industry that have benefited the most from an economic windfall, most often commodity-based businesses such as big oil companies.

Investopedia explains Windfall Profit Tax

As with all government taxes, there are those who support them and those who are against them. The benefits of collecting a windfall tax include increased revenues to the government that can be used for social programs. However, windfall taxes can be a disincentive to a company to pursue projects or promote innovation that potentially could result in less profit as a result of a windfall tax. Windfall taxes will always be a contentious issue among shareholders, corporate executives, the government, and the citizens.

Related Terms:
• Capital Gain
• Income
• Gross Profit Margin
• Profit and Loss Statement—P&L
• Unrealized Gain