[1] Excess profits taxes have often, but not exclusively, been imposed during wartime or in response to an event which provides some with an extraordinary ability to earn windfall gains.
Windfall taxes have often been proposed, and sometimes imposed, in order to discourage profiteering from temporary increases in resource prices, such as those for oil or gas.
[1] However, many countries imposed an excess profits tax during COVID to fund extra healthcare workers and to implement protection, such as masks.
Equally, from the onset of the pandemic to March 2021, the global fiscal response to mitigate the extensive health and economic impacts was unprecedented, totalling US$16 trillion in 2020 (IMF, 2021).
However, the pandemic's impact on businesses was uneven, with some sectors, notably information technology and pharmaceuticals, seeing significant profit surges and increased stock prices in the year following the outbreak.
This arrangement exchanged labor dilution and wage moderation for a commitment to cap the profits of companies involved in war-related activities.
In 1863, the Confederate congress[4][5] and the state of Georgia[6][7][8][non-primary source needed] experimented with excess profits taxes, perhaps the first time it has happened in American history.
[11] In 1991, some members of Congress sought unsuccessfully to pass an excess profits tax of 40 percent upon the larger oil companies as part of energy policy.
Some social reformers have championed a peacetime use of the excess profits tax, but such proposals face strong opposition from businesses and some economists, who argue that it would create a disincentive to capital investment.
[13] During the first World War, Danish authorities levied these taxes on food exporters who had been granted special trading permits to conduct business with Germany.
This move was seen as a crucial strategy to bolster government tax collections at a time when there was an urgent need to enhance revenue streams to fund national wartime efforts.
Hungary imposed an excess profits tax to address fiscal needs and economic imbalances exacerbated by global challenges such as the COVID-19 pandemic and rising inflation.
[citation needed] In November 2022, the Dutch government introduced a temporary EPT as a strategic response to mitigate the impact of surging energy prices.
This 33% tax targets companies operating within the oil, natural gas, coal, and petroleum refining industries.
This measure is intended to buffer the financial shock experienced by consumers and stabilize market fluctuations in the energy sector.
In reaction to initial market impacts, the government introduced a 0.1% asset-based cap on the tax, which stabilized banking shares somewhat.