What is Windfall Profits Tax ?

With the gas prices reaching record levels there is renewed pressure on the U.S. government to bring windfall profits tax on oil companies.

In 1980, United States federal legislation was passed that levied such a tax on oil companies because of the profits they earned as a result of the sharp increase in oil prices brought about by the OPEC oil embargo.

This issue came to a head in 2005, when oil and gas companies, such as Exxon Mobil who reported profits of US$36 billion for the year, experienced unusually large profits due to rising energy prices.

What is windfall profits tax ?

According to investopedia
 A tax levied by governments against certain industries when economic conditions allow those industries to experience above-average profits.

Windfall taxes are primarily levied on the companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses.

For ex: Oil

According to a USNEWS report If Exxon Mobil were a country, its 2007 profit would exceed the gross domestic product of nearly two thirds of the 183 nations in the World Bank’s economic rankings.

via [ USNEWS and investopedia ]

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