Question 1 · 10 marks · 145 words written
Opening · a definition
A windfall tax is an additional tax levied on big corporates that are registering sudden and huge increase in their profits without any additional effort.
Recently, India applied windfall tax on crude oil, ATF fuels due to Russia-Ukraine crisis.
Windfall Tax → redistribute wealth & promote equality:-
Body · points and prose
(1) Tax collected from the rich is used for social welfare, eg education, health.
(2) Income inequality → Oxfam: top 10% have 70% wealth ↳ shifts money from the rich to the needy.
(3) Prevents profiteering and helps in inflation indexing.
(4) Better Tax/GDP ratio and reduces fiscal burden.
Challenges → seen as arbitrary and excessive burden on pvt. sector. → unstable tax regime → decreases investment → promotes tax evasion.
Way Forward → permanent mechanism → reasonable tax rate to ensure growth.
Close · a framework
Thus windfall tax can help the govt achieve the task of welfare state (Art 38).