Windfall Gains Tax : The Ignorance of Indian Media and their Government Masters

 Windfall Gains Tax and the ignorance of Indian Media And their Political Masters .

At the onset, let me say that I have been a long time supporter of "Windfall Gains Tax" and was called "Bengali Communist" and other uncountable names.

What is termed as "Windfall Gains Tax" on oil refineries is actually an "Export Duty" targeting other South Asian Countries. 

Let's start with Definitions, shall we? 

What is "Windfall Gains" ?

When a company or a sector of industry, takes advantage of prevailing economic extra-ordinary circumstances and makes huge profits which in turn is hurting the economy by creating high inflation,  then and only then, the additional profits is called "WINDFALL GAINS" .

Extra-ordinary circumstances like War, Famine, Drought, Flood, Epidemic and of late, Global Supply Chain Disruptions.

 So, What is "Windfall Gains Tax"?

Let me Quote "Investopedia" otherwise may be you won't believe it.

" A windfall tax is 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 companies in the targeted industry that have benefited the most from the economic windfall, most often commodity-based businesses."

 What's the purpose of this tax?

This is to encourage the companies to reduce prices as after this tax the increased prices won't bring in any more revenue as Windfall gain. 

HOW TO IMPOSE WINDFALL GAINS TAX:

Simply add it to surcharge of Corporate Income and NEVER On Sale Price of Commodities.

But that's exactly Government of India is proposing as they are levied on Petrol, Diesel,  Aircraft Fuel exports which are refined in India. 

Trouble with such taxation is, these taxes will be passed on to end consumer and will not reduce the company's "WINDFALL GAIN".

Moreover "Windfall Gains" increases with the market share of the company. Therefore a constant Export duty or for that matter even Excise / VAT will hurt smaller players as their profits will take the hit disproportionately. 

So This is not Windfall Gains Tax as they won't reduce the prices or do any other SOCIAL GOOD.