This paper investigates the concept of the windfall profits tax (WPT), examining its historical context, international debates, and recent implementations, particularly in Germany and Italy. The windfall profits tax is levied on profits exceeding a “normal” return, though definitions of what constitutes “normal” versus “excess” profit vary. Historically, the WPT has been implemented during wartime and post-war periods to address extraordinary public financial needs and perceived inequities in profit gains. Notable examples include the United States and France during the World Wars, where excess profits were taxed heavily to fund war efforts and stabilize economies. The modern international debate on WPT has been influenced by economic disruptions like the COVID-19 pandemic and the Ukraine war. The paper explores the OECD’s Pillar 1 and Pillar 2 frameworks, which aim to address profit shifting and ensure minimum taxation levels globally, and proposes a potential third pillar focused on excess profits. In contemporary applications, the paper discusses the feasibility of implementing a WPT within the German legal framework, considering constitutional and fiscal aspects. It evaluates the potential structure of such a tax, including its calculation and impact. Additionally, the study examines the Italian windfall profits tax introduced in 2022, targeting the energy sector in response to the Ukraine war. This tax aligns with EU guidelines on taxing excessive profits and aims to redistribute revenues to mitigate economic disparities caused by the crisis. The WPT remains a contentious but potentially effective tool for addressing extraordinary profits during crises. Its implementation requires careful consideration of legal, economic, and policy implications to ensure fairness and efficiency. The cases of Germany and Italy provide valuable insights into the practical challenges and opportunities of applying a WPT in contemporary settings.
Filippo Luigi Giambrone (Mon,) studied this question.