Thirty-six of the top-earning companies in the fossil fuel industry and their funders made over $420 billion in surplus or “windfall” profits in the two years before July 2023, according to a new ActionAid report.
The report reveals that taxing these profits, referred to as windfall profits, could generate funds to boost public spending, especially for key areas such as education and climate action. Windfall profits are profits that exceed expected levels, often attributed to a change in external context. They are considered a ‘surplus’ above the regular and expected profits. In this case, windfall profits for these industries have been caused by events like Russia’s full-scale invasion of Ukraine in 2022 and the resulting hikes in energy product prices, as well as the increase in interest rates in response to growing inflation in many countries.
The contrast between the astounding corporate profits and the hardships generated by these events for ordinary people puts the incongruity of these profits into yet sharper focus. What is more, corporate profits can further worsen the inflation and cost-of-living crisis. For example, according to the International Monetary Fund, rising corporate profits account for almost half the increase in Europe’s inflation over the past two years as corporations have increased product prices well beyond the costs of imported energy.
ActionAid calls for the urgent introduction of “windfall” profits taxes for public services
ActionAid found that a tax of 90% on the windfall profits of these thirty-six companies could have generated as much as $382 billion in revenue over the past couple of years. This amount is almost 20 times more than the $21 billion provided by institutional and government donors for climate adaptation programs and services in 2021.
ActionAid International Secretary-General, Arthur Larok, said:
“The scale of profits that fossil fuel companies and their bankers are making in the wake of global crises is truly astounding, especially when compared to the hardships that these crises have brought upon regular people around the world. Windfall profits taxes make sense. They can bring in significant revenue for climate action and social services while taxing only the extraordinary corporate profits.”
