1. Introduction
The debate around windfall taxation became popular after the COVID-19 pandemic. What is windfall? The etymological definition of windfall is ‘that which has been blown down by the wind, originally in reference to wood or fruit brought to the ground by natural agency, and thus free to all’.Footnote 1 The concept of a windfall tax transposes the metaphorical idea of something – profit – being blown down by the wind without human intervention, and therefore unearned. As such, authors identify windfall taxes as levies aiming to ‘regain value for society that was privately captured through means other than the productive application of capital, labour, or ingenuity’.Footnote 2 Regaining value for society means the collection of the windfall tax is redistributed, like any other tax. In other languages, such as Spanish, the notion of a windfall tax reproduces the idea of taxing profit falling to the ground from the sky (impuesto sobre los beneficios caídos del cielo). Curiously, Cielo in Spanish also means Heaven. That enhances the idea of a sort of biblical manna miraculously obtained without any human effort.
Several sectors have been targeted recently for having abnormal levels of profitability. Since some Big Tech corporations raised their profits dramatically because of the pandemic while other sectors suffered significantly, a number of scholars have supported the enactment of excess profit taxes in this sector.Footnote 3 After the Russian invasion of Ukraine, the steep increases in energy prices and interest rates to curb inflation yielded unforeseen extraordinary profits in the food, energy and banking sectors. The European Union reacted with a windfall tax on energy retailers in a Council Regulation.Footnote 4 This was approved by a qualified majority under the legal basis of Article 122 TFEU (emergency measure). It was labelled a solidarity contribution, likely to avoid using the word ‘tax measure’, which would have required unanimity under Article 115 TFEU.Footnote 5 EU Member States were compelled to transpose the Council Regulation into their domestic systems and enacted additional windfall taxes on different economic sectors. Spain, for example, introduced a windfall tax on the banks and energy companies through Law 38/2022 (hereinafter the 2022 Spanish Windfall tax).Footnote 6 Portugal enacted a windfall tax on the food retail sector.Footnote 7
The advent of windfall taxes in EU Member States poses extraordinary challenges regarding their compatibility with EU and international economic law.Footnote 8 From the investor’s perspective, a windfall tax reduces the expected dividend from companies subject to the tax. If foreign direct investment is a priority for a country, windfall taxation may arguably jeopardise it.Footnote 9
However, the scope of this article is different. It aims to answer the question of what windfall tax means and to what extent states may tax windfalls. This requires consideration of what such taxes ultimately aim to achieve, and what kind of profits are considered ‘unearned’. The article argues that the practice of windfall taxation has evolved from taxing profits obtained through sheer luck in the context of exogenous crises (war, peaks of inflation, etc.) to taxing the excess profit systematically reaped by enterprises from a position of illegitimate advantage. This includes monopolistic positions, profit-shifting strategies, the reduction of costs in their global value chains involving social and environmental harm and so on. Borrowing the term from Christians and Diniz, windfall taxation is evolving towards taxing profits derived from unsustainable practices.Footnote 10
Such evolution is justified because the corporate tax system is broken. Windfall taxes primarily collect revenue that corporate taxation fails to access. This has an impact on the legal design of windfall taxation under the ability to pay and equality principles. Since windfall taxes cannot be perceived as a tax on general profit, the legislator finds extraordinary difficulties in singling out the taxpayers affected, calculating the extraordinary profits for the taxable base and determining the tax rate. The latter frictions in the legal design of windfall taxes confirm the difficulties in applying different taxes – corporate tax and windfall tax – upon business profit. Thus, a comprehensive, in-depth, unified reform of corporate taxation is needed.
This article begins with the evolving concept of windfall tax in Section 2. This offers insights into the enactment of such taxes from past experiences to the present, and how their rationale has evolved. Section 3 contextualises the present popularity of windfall taxation to tax unearned profit and its novel rationale due to the profound crisis of corporate taxation. Section 4 analyses how the evolving nature of windfall taxation affects the legal design of windfall taxation, and identifies the important difficulties it faces. Section 5 summarises the principal findings, suggesting that the practice of windfall taxation should be seen as an interim solution, which ultimately serves to underscore the need for a comprehensive reform of corporate taxation.
2. The evolving practice of windfall taxation
Windfall profit is often synonymous with expressions such as ‘excess profits’, ‘economic rent’, ‘economic surplus’, ‘abnormal profits’, ‘nonroutine profits’, ‘residual profits’, ‘super-profits’, ‘surplus profit’, ‘extraordinary profits’, ‘supernormal profits’, ‘extra-normal profits’ and ‘above-normal profits’.Footnote 11 Policy responses to such categories of profit are designed either as excise or profit taxes. Excise taxes, normally levied at the stage of the manufacture/production, can be based on quantity (e.g. a given amount per unit – for example, alcohol volume) or ad valorem calculated on a percentage of the sale price.Footnote 12 Profit taxes (also called net income taxes) are based on business profit, which amounts to the difference between business income and expenses.
Traditionally, commentators define windfall taxation as targeting abnormal profits obtained through luck (fortuitous gains from unanticipated events) and distinguishing them from those arising from the enterprise’s effort and planning, which should be taxed under corporate taxation.Footnote 13 This understanding stresses two elements. On the one hand, there is an idea of luck or chance behind the profits of specific sectors (e.g. energy, banking, food), which justifies that they be considered ‘unearned’. On the other hand, such taxes are usually levied on a short-term basis to curb emergencies (e.g. wartime, pandemic, natural disasters) and temporary economic instabilities such as inflation and hyperinflation peaks. However, the traditional understanding of windfall taxation coexists with a relatively new concept of windfall taxation, which aims to permanently tax the excess of unsustainable profit obtained by certain enterprises and is not therefore tied to any exceptional conjuncture. This section provides several examples to visualize the main differences between the two classes of windfall taxes.
A. Unearned profits reaped through luck
The vast majority of windfall taxes historically respond to extraordinary profits that are considered unearned by being obtained through sheer luck. They have been levied on a short, temporary basis as a response to either a crisis (such as a war) or a particular event (e.g. a high peak of inflation, deregulation of prices, privatisation of owned-state utilities at a low price).
The first example to be considered in this article is the 1980 US Crude Oil Windfall Tax, which was designed as an excise tax and imposed on the difference between the market price of oil and a statutory 1979 base price adjusted quarterly for inflation and state severance taxes.Footnote 14 This US windfall tax was levied upon domestic oil producers at the point of the first sale of taxable oil, which was generally to a refiner. As an excise imposed on gross revenue, all domestic oil producers were subject to the excise, regardless of whether they made little or no profit. The oil owned by a state or local government was tax-exempt. Different tax rates were imposed depending on whether producers owned small/large and new/old wells. The rationale of this excise tax was to reap enormous revenues as a result of the US deregulation of oil prices combined with an increase in world oil prices substantially above prices registered in 1978.Footnote 15 The US Congress was concerned that the domestic oil industry would obtain a windfall (an unearned gain without any additional effort) derived from a ‘speculative’ increase in oil prices. Since it was designed as an excise rather than a net income tax, the main criticism from an economic perspective was that it distorted the price system’s ability to efficiently allocate resources among competing economic sectors. Producers could not shift the tax to the refiners and, in the long term, resources would be allocated to non-taxed sectors (e.g. imported oil).Footnote 16 In addition, the different tax rates, which depended on the wells, created artificial incentives to avoid the levy. As commentators have explained, this US Crude Oil windfall tax was ultimately repealed in 1988 on several grounds: (1) the tax generated little revenue; (2) it was complex and costly to administer (enforcement costs were not counterbalanced by revenue increases); (3) in 1986 the US oil industry experienced difficult economic conditions due to the collapse of oil prices; and (4) due to the windfall tax on local producers, the United States became more dependent on oil imports.Footnote 17
The second historic example are the wartime taxes levied during the world wars (by the United Kingdom, the United States, Canada, Sweden and Denmark) and the Korean War (by the United States), which were configured as excess profit taxes in two ways. Either they used a formula to tax excess profit based on invested capital (e.g. the 1918 US wartime tax taxed profit above a 8 per cent return on invested capital), or they defined excess profit as net incomes over pre-war levels.Footnote 18 The rationale was that several sectors were obtaining an unearned reward in the form of extraordinary profits (e.g. increases in profit with a factor of 10 or even close to 50).Footnote 19 Wartime tax rates could be very high, varying from 50 per cent (e.g. the UK excess profit tax in 1916) to 95 per cent (e.g. the US excess profit tax during World War II).Footnote 20 Opponents of these wartime taxes argued, first, that there were no clear policy reasons to discriminate against specific sectors. For example, they were not imposed on farmers, although they also achieved high profits during the war.Footnote 21 Second, there were technical difficulties in delineating extraordinary profits through the two chosen methods.Footnote 22 Defining a normal profit level either by reference to a pre-war situation or fixed threshold on return of capital was problematic since, during the war, some sectors took greater risks, and therefore demanded greater rewards.Footnote 23 The difficulties in defining the excess profit led some economists at that time to qualify it as a tax on general profit.Footnote 24 Many leaders, like US President Wilson, advocated for a permanent excess profit to reach undue profit in 1919.Footnote 25
The third example is the 1997 UK windfall tax on privatised utilities, which introduced a one-off excess profit tax on privatised utilities considered to have unduly benefited from the privatisation process between 1984 and 1996.Footnote 26 The rationale was to reap profits from these former state-owned companies that were sold off too cheaply and regulated too lightly.Footnote 27 The UK Labour Government targeted privatised utilities. This windfall tax had a retroactive scope since the goal was to claw back some of the benefits obtained from the utility company owners. The taxable base was the difference between the value placed on a company at privatisation and a more realistic valuation based on its after-tax profits for up to the first four years after privatisation.Footnote 28 The tax rate of this excess profit tax was 23 per cent. As with the other historical examples, commentators stressed several problems associated with the legal design of the tax. First, although the tax was imposed at the level of the company, in reality it targeted the shareholders who obtained the profits derived from privatisation.Footnote 29 Yet the legal design of the tax failed to tax the relevant shareholders. Many of the initial shareholders had sold their shares shortly after the privatisation took place (and indeed, shares sold on the first day of trading amounted to more than one-quarter of the shares issued), so many shareholders affected by the windfall tax entering into force (in 1996) had not actually benefited from the privatisation.Footnote 30 Second, commentators also emphasised the difficulties of singling out a particular group of firms for the levy and defining ‘privatised utility’.Footnote 31 Third, the collection of the windfall tax was insufficient to compensate those workers who lost their jobs due to the privatisation. The windfall tax aimed to provide welfare benefits for those former workers. Yet, the cost of the increased unemployment benefits of these former workers (£6.5 billion) exceeded the £4.8 billion raised by the windfall tax.Footnote 32
B. Unearned profits reaped through unsustainable practices
The historical examples of windfall taxes show that they are traditionally understood as exceptional responses to crises or temporary situations. The more recent practice, however, suggests a different understanding of windfall taxation on a more permanent basis.
This idea is not entirely new. There have been attempts to prolong the duration of windfall taxes under the assumption that enterprises are able to obtain undue profit beyond specific conjunctures. As stated with the wartime taxes in Section 2(1), US President Wilson suggested creating a permanent excess profit tax to tax undue profit after the World War I. The Spanish Windfall tax on banks offers a recent example, of profits being perceived as undue beyond a mere inflation crisis.Footnote 33 In 2022, banks and credit institutions were subject to a windfall tax of 4.8 per cent of the sum of the net interest income and the net commission income for the taxable periods 2022 and 2023. The Spanish legislator extensively argued that the rise in interest rates due to the Russian invasion of Ukraine resulted in extraordinary unearned benefits for banks. Since the windfall tax was due to expire in December 2023, a relevant public debate took place on whether to extend it and make it permanent.Footnote 34 In December 2024, law 7/2024 eventually created a new windfall tax on net interest and commissions for three taxable periods (2024, 2025 and 2026), and repealed the previous 2022 windfall tax. Instead of the previous 4.8 per cent tax rate, the 2024 windfall tax applies a progressive tax rate from 1 per cent to 7 per cent. The text of the law does not provide any contextual justification for enacting this new windfall tax upon banks for three more taxable periods, which suggests that the rationale for the new tax is disconnected from an exogenous crisis. In addition, the European Central Bank has lowered the interest rate, and the Spanish inflation rate decreased compared with the situation in 2022.Footnote 35 In other words, the inflation crisis that justified the 2022 windfall tax had apparently vanished by 2024. In the author’s view, the legislator assumes that Spanish banks are making undue profits that need to be taxed beyond a mere inflation peak.
The debate about the concept of undue profit could be better framed today as related to unsustainable profit. Defining unsustainable profit first requires a brief explanation of the interplay between sustainability and taxation. The literature has stressed the relevance of taxation for sustainable development.Footnote 36 Taxes provide the resources to achieve sustainable development goals (SDGs) by allowing the states to provide public goods. Mobilizing resources becomes a human rights obligation under two core human rights treaties of the UN system: the International Covenant on Economic, Social and Cultural Rights (ICESCR) and the International Covenant on Civil and Political Rights (ICCPR).Footnote 37 Sustainability should inform the design of tax policy. What type of society do we want to sustain? How can we meet the needs of the present without compromising the ability of future generations to meet their own needs?Footnote 38 Sustainability concerns in crafting tax policy may, for example, justify a broad, single, personal income tax that eliminates preferential tax rates on capital gains, which favour the accumulation of capital by wealthy individuals.Footnote 39
Sustainability is traditionally understood as involving the three pillars of environmental, social and governance (ESG). Green taxes combat climate change and the harmful effects of pollution (the environmental pillar). Corporate social responsibility (CSR) prevents companies from engaging in aggressive tax planning schemes that avoid paying taxes, harming social cohesion.Footnote 40 Corporate tax governance demands transparency and the implementation of internal mechanisms to monitor the tax risks and liabilities within the enterprises.Footnote 41 More generally, as Koukoulioti puts it, ‘[t]axation is a prerequisite for the other pillars … The fewer resources a government has, the less capable it is to advance policies beneficial for the environment and society and to regulate effective corporate behavior’.Footnote 42 However, several authors call for a more active role for taxation within the ESG narrative (the so-called ‘T’ pillar), incorporating tax avoidance behaviour into ESG ratings.Footnote 43 Empirical evidence shows that current sustainability reporting is used as a ‘smokescreen’ for tax-avoidance practices.Footnote 44 The inclusion of the ‘T’ pillar in ESG aims to combat aggressive tax avoidance practices that are legal (in line with the letter of the law) but contrary to the spirit of the law, as well as to prevent greenwashing strategies.
Unsustainable profit usually refers to profit obtained by multinationals through tax-avoidance practices.Footnote 45 If multinationals engage in profit-shifting strategies to minimise their tax burden, they are harming the achievement of ESG by depriving states of the ability to deliver public goods. Therein lies the creation of windfall taxes targeting profits obtained through unsustainable means, such as tax-avoidance schemes. Profit-shifting has been an ongoing concern since 2013, with the launch of the OECD/G20 Base Erosion and Profit Shifting Project (BEPS) to equip governments with rules to address tax-avoidance practices.Footnote 46 BEPS has subsequently evolved into a Two-Pillar Framework (Pillar One and Pillar Two).Footnote 47 The Two-Pillar Framework is a soft-law proposal developed within the OECD/G20 Inclusive Framework on BEPS (over 140 countries). In the context of the data-driven economy, Pillar One creates a new taxing right for the jurisdictions where the users of the big digital giants are located.Footnote 48 Pillar One requires enforcing a multilateral treaty that has not yet been approved. Pillar Two introduces a global effective minimum tax of 15 per cent in order to prevent profit-shifting and set a floor for tax competition. Over 50 jurisdictions worldwide have implemented Pillar Two in their domestic legislation. If the effective tax rate per jurisdiction is below 15 per cent, the difference to the minimum will be levied as a so-called ‘Top-up Tax’. Many authors rightly qualify such a global minimum tax as an ‘excess profit tax’ over a ‘Substance-based Income Exclusion’ (SBIE).Footnote 49 The SBIE, computed from a fixed percentage on payroll and tangible asset components, reduces the taxable base on which this global minimum tax rate is applied. That means the 15 per cent, or the difference from the minimum, is applied to the taxable base, defined as the profits exceeding the SBIE. The exclusion of the SBIE from the taxable base strengthens the idea that the global minimum tax targets the profit generated using intangible assets, which are highly movable and easy to shift to low-tax jurisdictions to pay lower taxes.
Recently, some authors have referred to various ‘unsustainable practices’ rather than profit shifting/tax avoidance.Footnote 50 In recent years, there has been an accelerated transition from geographically concentrated production facilities to globally dispersed ones, often established to capitalise on favourable local conditions (i.e. less-stringent environmental regulations, cheap labour force). The decentralised global value chains model seriously compromises the capacity of the states – especially from the Global South – to collect taxes. Christians and Diniz propose a windfall tax on unsustainable profits to tax business profits attributable to unsustainable practices that damage the environment or trigger social harm (e.g. multinational enterprises paying salaries below subsistence wages). Their contribution proposes a straightforward methodology for measuring the environmental and social impacts of the supply chain and thus distinguishing between a sustainable and an unsustainable profit.Footnote 51
The new profile of windfall taxation that emerges from these examples is one that does not target an abnormal profit level obtained due to luck in an exogenous crisis. Targeted profits are those reaped in an unsustainable way, such as by engaging in profit-shifting/tax-avoidance strategies and reducing costs in the global value chain or provoking social and environmental harm. Unsustainable practices, such as those referred to in the previous examples, lead to unsustainable profit. The unsustainable behaviour of multinational enterprises requires that these windfall taxes are not levied on a particular temporary threshold – usually two or three years – but on a more permanent basis (i.e. Pillar Two). However, as Section 4 will show, the problem becomes how to quantify the excess profit derived from ‘unsustainable practices’ in order to determine the taxable base.
3. Windfall taxation as a reaction to the crisis of corporate taxation
The previous evolution in the application of windfall taxes beyond exogenous temporary crises to tax unsustainable practices shows that the corporate tax system is not working correctly to tax business profit. Corporate taxation, which is based on flat tax rates, is not progressive like the personal income tax. Does the flat rate in corporate taxation suffice to appropriately tax unearned extraordinary profits? The question leads to a broad reflection on the role of corporate income tax today.
It is frequently argued that the international system for taxing business profits is broken.Footnote 52 There are several reasons for this crisis. First, the proliferation of tax incentives, deductions and special regimes, combined with aggressive tax planning strategies, has resulted in corporations’ effective tax rates being much lower than the nominal/statutory tax rates.Footnote 53 Countries compete to attract investment, leading to a race to the bottom in the design and application of tax regimes. The flexibility in defining corporate tax residence fosters tax-planning strategies (e.g. dual-residence issues and corporate residence choices in low-tax jurisdictions).Footnote 54 Second, the indeterminacy in defining the source of income in the data-driven economy jeopardises the proper allocation of taxing rights across borders.Footnote 55 Third, the transfer pricing rules (i.e. those that determine how the taxable income of multinationals should be allocated among the jurisdictions where they operate) are beset with important shortcomings: (1) the mobility of functions, assets and risks, coupled with the separate-entity principle allows multinationals to shift substantial amounts of income to low tax jurisdictions where corporations have a low threshold of economic substance; (2) the digitalisation of the economy challenges the appropriateness of jurisdictional rules to tax based on physical presence; and (3) the complexity and uncertainty of the arm’s length principle, which assumes that the price agreed in a transaction between two related parties must be the same as the price agreed in a comparable transaction between two unrelated parties, jeopardises a uniform and coherent application of the principle to allocate profit.Footnote 56 The result of transfer pricing rules is that the residual profit derived from the exploitation of intangibles is allocated to rich countries rather than Global South countries.Footnote 57 There have been attempts to fix corporate taxation. As stated, first the BEPS project and second the Two-Pillar Solutions aim to prevent profit-shifting and base erosion practices, set a floor to tax competition and allocate taxing rights to market jurisdictions where users are located. Previous solutions that were not unanimously welcomed by all countries, namely Global South countries, are more patchwork than a profound reform of the current system. The arm’s length principle and other factors (globalization, technology, malfunctioning of anti-trust regulations, etc.) lead to certain multinational enterprises’ economic and financial supremacy over states’ sovereign power.Footnote 58
In this crisis scenario, there is ongoing debate about the future of corporate income tax. Many authors advocate for its abolition.Footnote 59 Their arguments, briefly, are various. Corporate taxes are said to be a cost passed to consumers and workers, lowering productivity. They are also said to distort investment allocation, introducing a high degree of complexity. Since the same business activity can be done through an incorporated entity and a non-incorporate entity, tax systems need to articulate rules dealing with the interplay of corporations and shareholders to alleviate economic double taxation. Tax authorities have a costly compliance burden when enforcing corporate taxes. Corporate tax also triggers opportunities for tax deferral and tax avoidance. Although corporate tax is not the primary revenue source for countries, Brauner argues that only political convenience can explain the resilience of the tax.Footnote 60
Conversely, the traditional argument for taxing corporations is to prevent rich shareholders from earning income through corporations and deferring the tax until a dividend is distributed. Economists have convincingly defended high corporate tax rates because they reduce the harmful effects of monopolistic positions (the so-called ‘market power’ of firms).Footnote 61 Along a similar line of thinking, Avi-Yonah supports corporate taxes as a limit to the power of the largest corporations, monopolies or quasi-monopolies.Footnote 62 Corporate tax would shift towards becoming a tax on monopolistic rents. If so, corporate tax should have a ‘progressive rate for super-normal returns (rents), culminating at a rate of 80% percent for income above $10 billion a year’.Footnote 63
This theoretical debate reveals that corporate taxation is not functioning correctly. The enactment of windfall taxes is a reaction to the decline in revenue collection and structural deficiencies in corporate taxation. A flat nominal/statutory rate, which is higher than the effective tax rate, cannot appropriately tax the abnormal levels of profitability derived from an exogenous crisis such as the rise of inflation. The Spanish legislator acknowledges this circumstance in the Preamble to the Spanish Windfall Tax. While banks and credit institutions have a 23.02 per cent effective tax rate in corporate taxation, the Preamble notes, the 4.8 per cent windfall tax rate on banks will still place the effective taxation below the nominal corporate income tax rate of 30 per cent. The Spanish windfall tax thus aims to raise the effective tax rates of banks towards the statutory rate, rather than above it.
Windfall taxation primarily aims to collect revenue that corporate income tax is not able to reap and to redistribute it among the people. Kades introduces the idea of ‘reverse insurance’ to outline the idea of full redistribution:
Leaving windfalls ‘where they fall’ means that a few individuals experience large gains while most receive nothing. Ex ante, before anyone knows who will be the lucky recipients of windfalls, risk-averse citizens will not find appealing the idea of leaving windfalls where they fall. They will prefer to capture the windfalls and distribute them evenly over the entire citizenry. I label such a redistribution scheme ‘reverse insurance’.Footnote 64
In 2022, the enforcement of the Spanish Windfall Tax applied this ‘reverse insurance’ justification. In the Preamble, the legislator mentioned an Income Pact (Pacto de Rentas) to convey solidarity among all Spaniards. Since Spanish banks were bailed out during the financial crisis,Footnote 65 the citizens now had the right to redistribute extraordinary profits derived from raising interest rates, so the European Central Bank decided to combat inflation due to the Russian invasion of Ukraine. The Spanish legislator deliberately referred to this idea of symmetry:
It is important to note that in the recent past significant public resources were mobilized to rescue certain financial institutions and to defend general interests in order to avoid even more damaging effects on the country’s economy. However, the bailout also enabled the sector to be restructured, with changes in market shares and improved business prospects for the institutions that overcame the financial crisis. The country is now facing an income pact and at this stage, the contributions to secure the common good do not have to be made by society as a whole to the direct rescue of a few, but on the contrary by a few in favour of the whole, but with the same aim of fostering the common good and a future of shared prosperity.Footnote 66
The need for a revenue-raising capacity in windfall taxation justifies repealing the tax if revenues are insignificant and the administrative costs to administer them are higher than the collection. As stated in Section 2A, the 1980 US Crude Oil Windfall Tax and the 1997 UK windfall tax on privatised utilities did not collect much revenue, and the administrative costs were higher than the actual collection. In the author’s view, excess profit taxes such as Pillar Two and windfall taxes on energy and banks are patchwork measures that confirm the need to reform how business profit should be taxed.Footnote 67 Economists even recommend introducing permanent taxes on economic rents (excess profits) rather than temporary taxes.Footnote 68 In summary, the crisis of the corporate income tax provides the context for the proliferation of excess profit taxes, either temporarily or permanently. Windfall taxes become thus patchwork measures until a corporate tax reform can be achieved.
4. An incoherent legal design for windfall taxes
Due to the structural problems and inability of the corporate tax system to collect revenue, windfall taxes have emerged as tools to redistribute the excess profit. Industries subject to windfall taxes are hostile to these levies, arguing that a corporate tax is already in force and that the levies will result in double taxation. Hence, the legislator aims to configure windfall taxes as ‘something different’ from a general profit tax. However, this poses formidable problems of legal design. Indeed, the legal design must comply with traditional principles of tax fairness – essentially, the principles of equality and ability to pay (Section 4A). However, as this section shows, there are important tensions in the legal design of windfall taxes if the aim is to defend these levies on the basis that they are really ‘something different’ from a general income tax. Indeed, the legislator struggles to single out which taxpayers are subject to the tax, to distinguish between extraordinary and ordinary profit in the calculation of the taxable base and to determine the tax rate that redistributes the profit without being confiscatory (Section 4B). Such tensions reveal the difficulties with drawing lines in taxing business profits and suggest the need for a fully fledged reform of corporate taxation.
A. Tax fairness as compliance with the ability to pay and equality principles
In taxation, ‘fairness’, ‘equity’ and ‘justice’ are commonly interchangeable. Since Musgrave’s 1959 seminal work, tax theorists have divided tax fairness into horizontal and vertical equity.Footnote 69 While vertical equity implies that taxpayers with a greater ability to pay should pay more taxes (‘the rich should pay more taxes than the poor’), horizontal equity means that ‘similar’ tax-paying units should be treated in a ‘similar’ fashion. Vertical equity is thus linked to the ability-to-pay principle and the progressive nature of our tax systems. It permits taxes to pursue wealth redistribution as a means to reduce inequality and poverty.Footnote 70 Conversely, horizontal equity is scattered across our tax systems. For example, it is relevant in allowing families to be equated to individuals in personal income tax (e.g. income splitting) or in allowing certain taxpayers to be carved out from a tax (e.g. the Catholic Church is not subject to real estate taxes in Spain).Footnote 71 Horizontal equity also suggests a different treatment between standalone companies and group entities under transfer pricing rules.Footnote 72
Although both classes of equity inform our tax systems, tax theorists and political philosophers are still divided about the normative dimension of tax fairness and the interplay between vertical and horizontal equity.Footnote 73 The lack of consensus among tax theorists and philosophers should not discourage lawyers from addressing the question of fairness in taxation. Aligning fairness with taxation becomes intuitive for most citizens.Footnote 74 If taxes are perceived as equal and progressive, they are legitimate and taxpayers are less likely to evade them.Footnote 75 In other words, building trust in a tax system requires enacting fair taxes.
The demand for a fair tax system is usually reflected within two constitutional principles: (1) the ability to pay principle; and (2) the equality principle. Yet there is a lack of uniformity in the constitutional recognition of these principles, especially the ability to pay principle. In Europe, for example, the adherence to the ability to pay principle is expressly mentioned as a constitutional requirement of fair taxation in the constitutions of some EU Member States (Croatia, Spain, Italy, Hungary, Greece, Cyprus, Bulgaria, France); while in other states (Romania, Finland, Sweden, Luxembourg and Denmark), the ability to pay is considered a guiding principle for tax law design, but without constitutional status.Footnote 76 Although there is no uniform recognition of the constitutional dimension of the ability to pay, all EU Member States have incorporated essential elements of the ability to pay into their personal income tax systems.Footnote 77 Moreover, regarding the principles of equality and non-discrimination, there is more constitutional uniformity. Both principles are constitutionally protected in nearly 36 countries spread across the world, as noted in the last volume of the European Tax Law Professor Association’s (EATLP) volume on taxation and inequalities, published in 2025.Footnote 78
The recourse to both principles somehow grasps the previous theoretical distinction between horizontal and vertical equity. Horizontal equity as an expression of equality imposes on the legislator the duty to treat equally those who are in a comparable situation while prohibiting any inequality that lacks any objective, proportional and reasonable justification under the purpose of the law in question. The ability to pay principle enshrined in the constitution adheres to vertical equity to ensure that the rich should pay more taxes than the poor. The focus of discussion at the constitutional level relates to the degree of progressivity which can be written into the tax system, without leading to confiscatory taxation that would violate the right to property.Footnote 79
Many authors primarily align windfall taxation with the ability to pay principle.Footnote 80 Businesses that obtain abnormal unearned profit must pay more taxes than other industries that do not benefit from these favourable conditions. The principle of equality, while often neglected by scholarship in this debate, is also relevant in the assessment. Under this principle of equality, the legislator must treat equally those who are in a comparable situation. Accordingly, the principle of equality requires justifying, first, why the levy is imposed on certain industries and not others, and second, why the calculation of the taxable base only targets extraordinary profits, thereby carving them out from general profit. To illustrate the tensions in the legal design, this author will use historical examples already discussed (in Section 2) and the 2022 Spanish Windfall Tax.Footnote 81
B. Frictions in the legal design
In-scope: who is subject to the tax?
The legislator must explain why certain industries are subject to the windfall tax and others are not. Kades defended the enforcement of windfall taxes if detecting windfalls is cheap and easy.Footnote 82 The wartime taxes were challenged because specific sectors (e.g. farmers) were excluded while earning similar extraordinary profits. The in-scope rules in Pillar Two – relating to large multinational groups with annual consolidated group revenue of at least €750 million in at least two of the four immediately preceding fiscal years – correctly assume that large multinationals are prone to engaging in profit-shifting strategies.
The Spanish legislator justified the 2022 Spanish Windfall Tax on banks and energy retailers due to the high unearned profits reaped by these two sectors thanks to inflation. However, some authors have criticised the in-scope rules drawn by the Spanish legislator.Footnote 83 Other sectors, like food distribution chains, earned important windfall profits due to inflation without being targeted by the Spanish tax.
To counter these criticisms, the legislative Preamble argued that both sectors (banks and energy retailers)
are characterized by a lower weight of their personnel expenses compared to the added value they generate compared to other economic sectors … Consequently, the low relative weight of personnel expenses in these sectors is a second factor that justifies them making a special contribution to the National Income Pact.Footnote 84
In other labour-intensive industries, employers can increase employee salaries in response to high inflation; such circumstances do not occur in low-labour-intensive industries (banks and energy retailers). Nevertheless, as argued by some authors, the tax is strikingly not imposed on other low-labour-intensive industries (e.g. pharma, telecommunications, insurance).Footnote 85 The legislator does not provide reasons why other low-labour-intensive industries are not subject to the tax. In addition, Spanish commentators have expressed reasonable doubts about including energy retailers in the scope of the measure. First, the price cap in the Iberian electricity market, which the European Commission approved, lowered the electricity prices and thus limited the accrual of windfall profit. Second, economists do not entirely agree that the energy sector makes extraordinary profits during high inflation.Footnote 86 Third, the Preamble referred to the volume of operations in value-added tax together with pre-2021 profit levels, which are not directly connected with the potential extraordinary profits in 2022.Footnote 87
The Spanish windfall tax on energy retailers thus shows the legislator’s difficulties in singling out taxpayers from a particular industry and not others. By restricting the in-scope rules to certain economic sectors, the measure avoids the qualification of ‘general income tax’. Yet Spanish commentators criticised the lack of substantial reasons for such a restricted scope as only applicable to energy retailers and banks. If so, the windfall tax on energy retailers and banks risks being considered discriminatory in breach of the principle of equality. To avoid the problem of ring-fencing specific industries, some countries (e.g. Croatia) introduced an excess profit tax for all corporate taxpayers whose profits exceeded the average annual taxable profit generated in the preceding four years – from 2018 to 2021 – by at least 20 per cent.Footnote 88 This general excess profit tax aims to collect extraordinary profits linked to inflation in all economic sectors and avoids being challenged as discriminatory.
The taxable base: how to isolate extraordinary profits?
Determining the taxable base, which requires isolating and quantifying the extraordinary benefits, becomes the real conundrum in taxing windfalls. How do we distinguish extraordinary from ordinary profit? Windfall taxation cannot be perceived as a tax on general profits; otherwise, it would result in double taxation and discriminate against targeted industries. Equality is compromised, and the ability to pay could be seriously damaged if the taxable base were unsuitable for exclusively catching extraordinary profit.
These constitutional concerns regarding the taxable base were decisive in the 2015 judgment of the Italian Constitutional Court, which addressed a surcharge on corporate income tax (IRES) for companies operating in the oil, gas and energy sectors.Footnote 89 The Italian Constitutional Court declared this surtax to be contrary to the general principles of equality and the ability to pay enshrined in the Italian Constitution.Footnote 90 First, the surtax was applied to the overall corporate tax base, and not only to the excess profit (sovra-profitti) realized by the companies in scope. Second, the surtax was introduced for an unlimited period of time, which could not qualify as a temporary measure to counteract exceptional economic circumstances. Third, the Italian law did not introduce any mechanism to guarantee that the surtax would not actually be passed on to the final customer through increased retail prices.
The Italian case shows that drafting the rules to determine the taxable base has proven to be a thorny problem in past instances of windfall taxation. It is quite challenging that a simple surtax on corporate tax applied to specific sectors, as the IRES, complies with the ability to pay and equality principle. The US 1980 windfall tax proved unsatisfactory precisely because it was an excise imposed on gross revenue rather than on net income. Since it was on gross revenue, it disregarded whether the oil producers had made a profit. Regarding wartime taxes, the recourse to a predetermined formula on invested capital or the pre-war profit levels proved ineffective in isolating extraordinary profits from ordinary profits.
Another example is the 1997 UK windfall tax. Two critical issues arose concerning the determination of the taxable base, as explained earlier. First, while the tax was levied on the companies, the actual profit was obtained by the shareholders, who in most cases sold the shares immediately after the privatisation. Second, under a double tax treaty analysis to grant relief for double taxation, there were serious doubts that the UK windfall tax was actually a tax on profit, as reflected in the tax disputes that ensued. Indeed, US shareholders of these privatised utilities that paid the UK windfall tax requested the US foreign tax credit to grant relief for double taxation. The request was, however, denied because US tax authorities considered that no income tax had been imposed, since the taxable base was determined by the difference between two defined values (i.e. one based on profit-making and the other on flotation). Yet the US taxpayers algebraically reformulated the taxable base of the UK windfall tax to convince the US Supreme Court that the windfall tax was an income tax targeting profit.Footnote 91
The previous examples show the need to treat windfall taxes as income taxes rather than excise taxes. The question is whether extraordinary profit can be accurately defined and isolated in the accounting rules.Footnote 92 Unfortunately, current accounting rules (GAAP) approved by the Financial Accounting Standard Board (FASB) after 2015 do not separate extraordinary, unusual gains from operating results.Footnote 93 The reason given for prohibiting the presentation and disclosure of extraordinary items was to alleviate uncertainty for accountants, auditors and regulators, and simplify their work.Footnote 94 Such a policy decision is regrettable. Financial accounting provides an accurate and faithful representation of an entity’s financial results, which external parties can use to evaluate an organisation’s recent financial performance.Footnote 95 Historically, financial accounting has been linked to accountability (i.e. shareholders). Nowadays, the accounting literature highlights the usefulness of financial reporting information for capital providers’ resource allocation decisions (financial valuation).Footnote 96 The lack of reporting of extraordinary profits damages the accuracy and transparency of the financial statements, both from an entity’s perspective of accountability and valuation. This FASB decision can be framed as part of a more general trend that grants flexibility and high discretion to managers when preparing financial statements.Footnote 97 Unfortunately, such flexibility could lead to misleading financial statements. Financial accounting is relevant to calculating taxable business profit in the corporate income tax. Many countries follow the book-tax conformity principle, which means tax authorities cannot challenge an entity’s accounting options, valuations and characterisations if it follows accounting rules.Footnote 98 Hence, legislators face difficulties in isolating and quantifying extraordinary profits due to prevailing accounting standards.
Although the lack of accounting rules hinders the calculation of extraordinary profits, other alternatives exist to determine the taxable base in windfall taxes adequately. That occurred with the 2022 Spanish Windfall Tax. Due to inflation derived from the war and the increases in interest rates by the European Central Bank, the Spanish banks reported record profits in 2022.Footnote 99 The windfall tax’s taxable base was the sum of the net interest income plus the net commission income. This taxable base aims to pinpoint the extraordinary unearned profits accrued by banks derived from the rise in interest rates on loans and mortgages. In Lithuania, a similar windfall tax on the banking sector formulated its taxable base as net interest income exceeding 50 per cent of the average of the last four regular financial years.Footnote 100 Consequently, in the banking sector, the magnitude of ‘net interest/net commission’ seems suitable for calculating windfalls derived exclusively from the rise of interest rates to combat inflation. However, banks are exposed to a wide variety of risks, which result in strict accounting provisions that reduce their profits. Some criticise the legislator for not taking these specific accounting provisions into account to modulate the taxable base in the windfall tax.Footnote 101
Determining the taxable base by reference to net profit rather than gross profit/turnover seems to be the right approach to be followed in windfall taxation to comply with the principles of equality and ability to pay. That was the main challenge to the 1980 US Crude Oil Windfall Tax, which was an excise imposed on gross revenue. The 2022 Spanish Windfall Tax calculated the taxable base by reference to gross turnover (importe neto de la cifra de Negocios). As commentators argued, the turnover does not show whether the entities made a profit in the taxable period.Footnote 102 In Pillar Two, the rules for calculating the taxable based on net profit are highly complex.Footnote 103 The IMF recommends several ways of calculating the net profit for the taxable base in the energy sector.Footnote 104
To conclude, the calculation of the taxable base must be linked to the justification of extraordinary profits in a particular industry. Since financial accounting does not help to determine extraordinary profits, this is not easy for the legislator. In South America, some commentators stressed that the taxable base of the windfall taxes levied on oil and gas in Venezuela and Bolivia (2005–08), which were designed as excess profit taxes, targeted general profit rather than windfalls.Footnote 105 In Spain, Law 7/2024, which extends the windfall tax on banks for three additional taxable periods, does not provide a clear justification regarding whether banks will continue to generate extraordinary profits from 2024 to 2026. This lack of explanation is particularly relevant given the changing economic conditions since 2022, notably the disappearance of high inflation. As stated in Section 3, the need for tax collection due to the inefficiencies of corporate tax causes a kind of ‘legislative inertia’: once the windfall tax is created, the tax continues to exist regardless of the justification of the existence of extraordinary profits.
Tax rates: when are windfall taxes confiscatory?
Some authors support high tax rates in windfall taxation – close to 100 per cent – to achieve full redistribution of the extraordinary profit.Footnote 106 Suppose profits are obtained through means other than the productive application of capital, labour or ingenuity (i.e. luck and unsustainable practices). In that case, one may argue that the state has the right to reap such profit in its entirety and redistribute it, since there is no legitimate expectation or property right over a windfall that is obtained due to brute luck. Likewise, shareholders would face no special incentive to divest from a company just because it was prevented from keeping extra profits that happened to arise serendipitously.Footnote 107 History shows few examples of 100 per cent taxation of the windfall: (1) the US 1934 Vinson-Trammel Act taxed 100 per cent of the naval contractor profits;Footnote 108 and (2) the Canadian war excess profits tax rose to 100 per cent by 1943.Footnote 109 Although these efficiency and philosophical arguments may justify windfall taxes at a 100 per cent rate, many tax systems prohibit confiscatory taxation. The legal question answered in this section is whether such a 100 per cent tax rate would become confiscatory. It is challenging for courts to balance taxpayers’ property rights against their duty to contribute to public expenditures.
Some constitutions expressly prohibit confiscatory taxation (i.e. Article 31 of the Spanish Constitution). In Spain, rather than a principle of non-confiscatory taxation, authors such as Escribano convincingly argue that the ability-to-pay principle is limited: taxes cannot be confiscatory (alcance confiscatorio).Footnote 110 The Spanish constitutional court confirmed that the progressivity of the whole tax system – the application of all taxes in force – cannot deprive the taxpayer of their income and property.Footnote 111 This overall constitutional interpretation urges us to examine the tax system as a whole, rather than a singular levy, to verify whether the tax system exhausts the taxpayer’s wealth. In the United States, the debate has centred on whether the Takings Clause of the Fifth Amendment can serve as the legal basis to strike down taxes as confiscatory. US scholars emphasise that there is no constitutionally defined limit on absolute levels of taxation; hence, courts are reluctant to characterise taxes as confiscatory, thereby violating the Fifth Amendment.Footnote 112 It appears that confiscatory taxation necessitates the destruction of part of a company’s pre-existing property value, thereby preventing the company from operating successfully and prosperously.Footnote 113 In other countries, constitutional courts seem to review quantitative thresholds in isolation. While an 80 per cent inheritance tax rate was constitutional in Belgium, other countries, such as the Slovak Republic, considered this tax rate confiscatory.Footnote 114 Commentators highlight the challenging balancing exercise of constitutional courts, as states have the absolute power to decide tax policy.Footnote 115 Debelva suggests that a tax that takes away all the value of the investment or the generated profit would qualify as confiscatory.Footnote 116
Constitutions neither set a specific tax rate to deem a tax confiscatory nor provide clear guidelines for determining when a tax becomes so.Footnote 117 Some national windfall taxes on energy retailers, which were enacted in response to the EU Council Regulation on the EU solidarity contribution in response to the Russian invasion of Ukraine, introduced high rates: (1) Slovak Republic (70 per cent); (2) Ireland (75 per cent); (2) Czech Republic (60 per cent); (4) Denmark (75 per cent); (5) Luxembourg (90 per cent); (6) the Netherlands (65 per cent); (7) Norway (78 per cent).Footnote 118 Are these rates confiscatory? Qualifying a tax as confiscatory depends on the margin of appreciation of courts and tribunals. A few examples show the difficulties of finding commonalities among different courts and tribunals to prevent confiscatory taxation.
The European Court of Human Rights (ECtHR), in Gall v Hungary, scrutinised a severance payment taxed at 98 per cent under the right to property in Article 1 of the First Protocol of the European Convention on Human Rights (ECHR).Footnote 119 The ECtHR confirmed a conflict between the right to property and the state’s role in deciding taxes or contributions to be collected.Footnote 120 Although the state has a wide role in configuring the tax system to achieve social justice, taxes must be implemented in a non-discriminatory manner and comply with proportionality requirements. In this case, not only was the tax introduced retroactively, but the rate exceeded the general personal income tax (16 per cent). The ECtHR ruled that the taxpayer suffered a substantial deprivation of the property right. The weight of the reasoning is that the tax was imposed retroactively only on a particular group of individuals, breaching legitimate expectations. The ECtHR avoids an abstract assessment of whether the tax rate itself is confiscatory. In Imbert de Tremiolles v France, the ECtHR did not find an infringement of Article 1 of Protocol No. 1 concerning a method of calculating the wealth tax with a ceiling of 85 per cent.Footnote 121 The ECtHR granted the state a broad margin of discretion to calculate the wealth tax, including the ceiling.
Under international investment law, investors are protected against tax measures that expropriate an investment under the legal framework of international investment agreements (IIAs). In some cases, arbitration tribunals have discussed whether high tax rates could be deemed expropriation in this way. One paradigmatic example was Burlington v Ecuador.Footnote 122 The arbitration tribunal dealt with a windfall tax with rates reaching 99 per cent, which affected oil exploitation by a US investor in Ecuador. The tribunal ruled that the 99 per cent tax rate considerably diminished the investor’s profit, but there was no evidence that the investment became unprofitable or worthless.Footnote 123 In the dissenting opinion, arbitrator Orrego Vicuña argued that the tax was expropriatory since it would be impossible to find a willing buyer for the investment in circumstances that jeopardised the business’s viability.Footnote 124
It can therefore be said that the ECtHR and international arbitration tribunals are cautious about finding taxes confiscatory, thus showing a concern with eroding national tax sovereignty. In national legal systems, the judgments of national constitutional courts reveal different perceptions of confiscatory taxation. In the author’s view, the differing perceptions of when a tax rate becomes confiscatory are influenced by political, social, cultural and constitutional contexts. Nordic countries traditionally have higher rates than Southern European countries without being confiscatory. Is a 100 per cent tax rate on windfalls due to luck confiscatory? There are arguments to defend that it is not confiscatory. Let us examine the tax system as a whole, just as the Spanish Constitutional Court does. A tax rate of 100 per cent on a windfall tax targeting profit obtained due to serendipity does not trigger the exhaustion of the taxpayer’s taxable wealth. Such a tax rate on profits disconnected from the taxpayer’s effort could not destroy the company’s property and jeopardise its ability to operate successfully in the future. The practice is that recent windfall taxes do not have high rates, perhaps to avoid being labelled as confiscatory. Regarding windfall taxes on energy retailers, most countries followed the 33 per cent rate established in the EU solidarity contribution (Bulgaria, Finland, France, etc.).Footnote 125
In analysing the tax rate, aside from the legal discussion on confiscatory taxation, the legislator should consider the interplay between corporate tax and windfall tax. The joint action of both taxes can seriously compromise the ability to pay principle. In Spain, the 2022 windfall tax on energy and banks was not a deductible expense in corporate income tax. The denial of deduction surprisingly clashes with a consolidated practice that allows enterprises to deduct other taxes paid from the taxable base in corporate taxation (i.e. gambling taxes). Commentators argued that the windfall tax’s non-deductibility breached the ability to pay principle.Footnote 126 If the corporate income tax base measures taxpayers’ economic capacity, preventing the deduction of the windfall levy impacts the amount of the company’s profit. The corporate income tax is levied upon an economic capacity that does not actually exist, given that certain expenses (i.e. the windfall tax) that should be deducted as other expenses or taxes paid are disallowed.
5. Epilogue: reforming the corporate tax system
Windfall taxation, as a tax on unearned profit, is evolving from the traditional focus on profits obtained through sheer luck (e.g. extraordinary profit due to interest rate rise) to taxing profits derived from unsustainable practices (e.g. profit-shifting in Pillar Two). Such a shift reveals the profound crisis of corporate income tax and its inability to tax business profits appropriately. Windfall taxation thus emerges as a solution for collecting revenue that corporate tax is not able to reap. As we learnt from past experiences, the collection of revenue is decisive. If windfall taxes do not collect the expected revenue, they are simply repealed. For example, the high administrative burden of collecting the 1980 US windfall tax was decisive in its abolition. The 1997 UK windfall tax did not collect as much revenue as expected. It was insufficient to provide welfare benefits to the former workers of the privatised utilities.
Given our analysis, it should be concluded that, for all its present popularity, the windfall tax should be seen as an interim measure, justified only until a profound reform of corporate taxation is conducted. This is demonstrated by the significant tensions surrounding compliance with the fundamental principles of ability to pay and equality. The legislator struggles to make a windfall tax different from a general income tax under the ability to pay and equality principles. The in-scope of the tax – that is, singling out the industries and sectors subject to the tax – cannot discriminate and be perceived as arbitrary, as occurred with the wartime taxes and the 2022 Spanish Windfall Tax. Regarding the taxable base, there are challenges in distinguishing extraordinary profits from ordinary profits. Although a windfall tax should aim to redistribute the unearned profit fully, there are risks associated with the tax rate under the principle of ability to pay. Such frictions reveal that it is not so easy to compartmentalise the taxation of business profits among different taxes.
Reforming the corporate tax system should be oriented towards ensuring effective revenue collection, which is currently not occurring. As stated in Section 3, corporate effective tax rates are much lower than nominal rates.Footnote 127 Not only do multinational groups engage in active profit-shifting strategies, but states also compete to attract foreign investment in a race to the bottom. Addressing a fundamental reform of the corporate tax system exceeds the scope of this contribution, which aims to present the challenges derived from the legal design of windfall taxes, taking the evolving nature of windfall taxes into account. They appear as a patchwork solution to increase corporate tax revenue collection from specific industries and sectors. The solutions for a fully fledged corporate tax are varied. For example, three proposals are usually discussed in the literature. First, a radical solution would require a shift towards formulary apportionment as the method for allocating business profits, rather than the arm’s length principle.Footnote 128 Instead of pricing individual transactions within the group (the arm’s length principle), formulary apportionment allocates the group’s global profit based on tangible factors such as employees, sales and assets. Second, some authors suggest a shift towards taxing profits in the country where a business makes its sales to third parties (i.e. a ‘destination-based cash flow tax’).Footnote 129 Third, a different solution could be to implement a progressive corporate tax rate, as suggested by Professor Avi-Yonah, for the purpose of taxing monopolistic rents.Footnote 130
It is unlikely that the previous radical solutions towards reforming corporate income tax will be endorsed in the short term. Realistic efforts are now being made to combat tax avoidance. On the one hand, the implementation of anti-avoidance standards in domestic and international legislation, such as the principal purpose test or specific anti-avoidance measures, aims to equip tax authorities with the legal tools necessary to combat abusive tax schemes.Footnote 131 On the other hand, multinationals should be required to report aggressive tax behaviour (the missing ‘T’ pillar in ESG), as described in Section 2. Since fundamental reforms of the corporate tax are not foreseeable, we can expect to witness the proliferation of excess profit taxes and surcharges on corporate income tax in the near future. The global minimum tax (Pillar Two) is a prime example of an excess profit tax designed to curb the race to the bottom and prevent profit-shifting. The IMF recommends permanent excess profit taxes in the energy sector, rather than ad hoc temporary solutions.Footnote 132 As argued in this article, the legal design of these surcharges and excess profit taxes would face important challenges under the ability to pay and principle of equality.
Competing interests
The author has no conflicts of interest to declare.
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