Government has defended the windfall tax (applicable from July 1), as a way to rein in the “phenomenal profits” made by some oil refiners who chose to export fuel to reap the benefits of skyrocketing global prices while affecting domestic supplies.
- The United States Congressional Research Service (CRS) defines a windfall as an “unearned, unanticipated gain in income through no additional effort or expense”.
- Domestic producers sell crude oil to domestic refineries at international parity prices, thus making windfall gains.
- E. g. ONGC reported bumper profits in the March quarter (when international prices soared to a near 14-year high of $139 per barrel).
- The U.N. chief urged all governments to tax these excessive profits “and use the funds to support the most vulnerable people through these difficult times.”
- Besides India, the United Kingdom, Italy, and Germany have either already imposed a windfall profit tax or are contemplating doing so.