Question 1 · 10 marks · 150 words written
Opening · a definition
Windfall tax can be understood as gains from any unexpected sudden rise in price of a commodity. e.g. Property prices (real estate).
Body · points
Windfall tax effectively redistributing wealth
↳ ① To ensure profits from inflation distributed across customers. ↳ ② Additional tax revenue to government for welfare measures. e.g. Recent imposition of windfall tax on oil prices. ↳ ③ Protection against price rise of a commodity till changing tax rates are undertaken.
Promoting greater economic equality ↳ ① Funds for infrastructure development having multiplier effects in economy.
↳ ② Promoting inclusive development. ↳ ③ Minimising income inequalities, e.g. According to Oxfam report, 1% of population in India own > 40% wealth.
Way forward
Close · a way forward
↳ (1) Rationalised tax structure to prevent tax terrorism.
↳ (2) Easing compliance structure under taxation regime.
↳ (3) Increasing commodities under windfall tax regime.
An effective windfall tax regime forms a key to inclusive growth in India.