Windfall Profits

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DEFINITION of 'Windfall Profits'

Huge profits that occur unexpectedly due to fortuitous circumstances. Such profits are generally well above historical norms and may occur due to several factors - such as a price spike or supply shortage - that are either temporary in nature or may be longer lasting. Windfall profits are generally reaped by an entire industry sector, but can also be reaped by an individual company.

INVESTOPEDIA EXPLAINS 'Windfall Profits'

In recent years, surging prices for crude oil have led to record profits for many energy companies, leading to demands from politicians to deem them as windfall profits and tax them accordingly. Needless to say, most companies that have made windfall profits strongly resist attempts to pay additional taxes on them. Arguments made by such companies are that record profits lead to record taxes payable by them in any case, as well as the fact that windfall profits are likely to be only temporary in nature.

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