Excess profits tax


What is it?
A special one-off levy on firms or industries deemed to be generating excess profits. Generally these firms are seen to be profiteering – that is, taking advantage of crises or unusual circumstances to generate more revenue than would be possible in a competitive market.
What is the problem that this change would seek to address?
Markets are not working as they should and are allowing excess profits for certain firms at the expense of consumers, who can be compensated in some way via a one-off tax.
What are the advantages?
As a one-off, retrospective tax on specific firms or industries, it is relatively simple to administer, and will not affect firms’ investment decisions or profit margins in future.
What are the disadvantages?
It can be difficult to determine what exactly counts as an “excess” profit, and as a one-off source of revenue, the tax cannot be used to fund ongoing public programmes.