Definition of Windfall Tax

It is a tax imposed by a government on those companies who make excessive profits, usually by exploiting monopoly.

Explanation of Windfall Tax

The benefits of a windfall tax include proceeds being directly used by governments to support funding for social programs. However, those against windfall taxes claim that they reduce companies’ initiatives to seek out profits. They also believe that profits should be reinvested to promote innovation that will in turn benefit society as a whole.