In recent years, market concentration in sectors across the world economy, including food, shipping, pharmaceuticals and digital platforms has led to a small number of very large corporations enjoying returns far above normal levels, often due to monopoly power or crisis-driven windfalls. Such windfalls can enable large corporations, particularly in fossil fuels and finance, to appropriate public wealth while households face rising costs of living. Excess profit taxes (EPT) can be permanent or temporary, as an add-on to the corporate income tax to raise revenue during periods of adverse shocks. The concept of ‘excess profit’ is generally equivalent to economic rent, defined as returns in excess of the opportunity cost of the investment, and can therefore be understood as the returns above the risk-adjusted ‘normal’ returns. According to the IMF, the current geographical distribution of excess profits across countries aligns with patterns consistent with multinational profit shifting : applying a 10 percent EPT to the globally consolidated accounts of multinationals, on top of existing corporate income taxes, and allocating the tax base according to sales could therefore increase global revenues by around 16 percent of current corporate income tax receipts. While this illustrates the potential scale of revenues under a coordinated international approach, such arrangements face significant political and administrative challenges, and EPTs should also be understood as feasible instruments at the national or regional level. Moreover, permanent EPTs can play an important role in taxing economic rents arising from structural factors such as market power or concentration, while temporary windfall profit taxes are particularly suited to capturing crisis-driven rent extraction linked to external shocks. Various forms of excess profit taxes have existed for a very long time, including 22 countries adopting them during World War 1, and the USA re-adopting an excess profit tax law in 1950. As of 2026, excess profit taxes exist mainly in the extractive sector, such as for example Norway’s Special Petroleum Tax was introduced in 1975, and Ghana’s Additional Oil Entitlement (AOE) which was introduced in 2000.
A windfall profit tax can serve as a critical corrective against crisis-driven rent extraction, targeting the extraordinary or excess profits of extractive corporations that arise not from increased productive efficiency or innovation, but from external shocks (such as energy price spikes, supply disruptions, geopolitical crises, or regulatory changes) that temporarily inflate returns beyond ‘normal’ levels. While windfall profit taxes are designed as a temporary, high-marginal levy on profits that exceed a baseline average of previous years, this instrument captures returns derived from monopoly power or speculation rather than innovation or efficiency. These revenues can then be redistributed to shield vulnerable households from price volatility and fund emergency social transfers, which is why many countries, particularly in the EU, implemented windfall taxes on energy sector profits since 2020 , thereby also preventing the transfer of wealth from consumers to corporate shareholders, although it has been done with limited success, although in practice their effectiveness has been limited in part due to tax avoidance responses, including the shifting of profits across time or jurisdictions. For instance, some research shows, focusing on the abnormal profits earned by top fossil fuel and financial companies during periods of high oil and gas prices between 2021 and 2023, that these companies made windfall profits (ie. profits above the massive normal levels plus 20%) of USD 424 billion. Considering two tax rates of 50% and 90%, a windfall profits tax on the biggest 36 companies over the same period would have raised between USD 212 and USD 382 billion globally. This is almost 20 times as much money as was spent globally on climate adaptation in 2021 and more than required to bridge the financing gap of social protection in low-income countries.
