There are growing calls for a one-time tax, known as windfall tax, to be brought into effect due to energy giants such as BP and Shell having reported huge increases in profits as the prices of oil and gas surge around the world, whilst the country struggles with rising utility costs and inflation.
Those in favour of a tax on these profits of energy corporations believe that the money gained might be used to alleviate the burden of growing utility costs on families who are struggling with all-time-hight living costs.
What exactly is a windfall tax?
When a government levies a one-time tax on a business or collection of businesses, it is referred to as “windfall tax.”
Particular businesses and sectors that have benefited from an unexpected financial gain for which they were not accountable, also known as a windfall, will be targeted by the windfall tax.
The increase in energy costs is a good example of a current windfall. This is because of the demand for oil and gas quickly rising just as the world emerges from a pandemic and finds itself in a supply struggle due to Russia’s invasion of Ukraine, leading to energy companies seeing massive increases in their profits.
How much could this one-time levy raise?
Originally, Labour claimed that a one-time, year-long windfall tax could potentially collect £1.2 billion which would cover energy bill reductions, which are currently at an all-time high of £1,971 for an average dual-fuel contract.
It is forecasted that October may also show a significant increase in costs. Due to the continuously increasing energy costs, it is estimated that the fee may now fetch £2 billion.
Is a windfall tax the answer to the energy crisis?
The tax may generate £2 billion, giving the government more muscle to tackle rising energy costs.
However, greater support may be required to help millions of families struggling to pay their bills, as rising inflation drives Brits to pay more for everything from food to fuel, worsening the cost-of-living crisis.
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