Beyond the Boom: Towards Fair and Effective Fossil Fuel Windfall Profit Taxes

On 28 April, the first edition of the 2026 ATI–GSLTF webinar series brought together around 45 participants from member countries of both organisations to examine the design and implementation of windfall profit taxes in the fossil fuel sector. Renewed energy price volatility driven by recent geopolitical crises has brought windfall profit taxes back to the fiscal policy debates across producing and consuming countries. Yet capturing these windfalls is more complex than it appears: when commodity prices spike, reported profits in tax havens often rise in parallel, effectively narrowing the taxable base precisely at the moment governments most need additional revenue. The session combined new academic research from the International Tax Observatory with policy perspectives from Norway, Spain, and Ghana, while also linking these debates to ongoing negotiations on the United Nations Framework Convention on International Tax Cooperation.

Where do extractive windfalls actually end up?

Ninon Moreau-Kastler and Giulia Varaschin of the International Tax Observatory presented findings from their forthcoming paper The Global Allocation of Extractive Windfalls (Chiocchetti & Moreau-Kastler, 2026). Drawing on global Country-by-Country reporting data covering 77 multinational companies - representing roughly 30% of global mining activity and 37% of oil and gas activity between 2016 and 2023 - the study tracks where windfall profits are allocated when commodity prices rise.

The findings are striking. A 1% increase in commodity prices is associated with a 1.46% increase in consolidated multinational enterprises (MNE) profits. However, a disproportionate share of these windfalls is booked in tax havens. While tax havens account for around 13% of total profits in the sample, every additional dollar of consolidated windfall results in about 20 cents being shifted to tax-haven affiliates. A 10% commodity windfall increases the tax-haven share of group profits by roughly one percentage point. Notably, relatively little of the additional profit is recorded in midstream, downstream, or headquarters jurisdictions. Instead, windfall gains tend to accumulate either in extractive jurisdictions or in tax havens.

These findings have important implications for policy design. Conventional windfall taxes levied at the affiliate level on locally declared profits remain vulnerable to profit shifting. The presenters therefore outlined two more robust approaches: (i) group-level taxation of excess profits, with consolidated windfalls apportioned across jurisdictions using objective keys such as sales, production, or extraction activity; and (ii) taxation of market valuation gains, which are observable, more difficult to manipulate than accounting profits, and could also apply to non-resident MNEs through sales-based apportionment.

The Norwegian experience

Kari Elisabeth Kaski, former Norwegian MP and Deputy Chair of the Finance Committee, presented Norway's petroleum tax system as a longstanding example of structural resource-rent taxation rather than a temporary crisis levy. The system is grounded in the principle that subsoil resources belong to the Norwegian people. Petroleum companies are therefore subject to a combined marginal tax rate of 78% (22% of the standard corporate income tax and a 56% special petroleum tax which is technically applied through a sequential cash-flow calculation since 2022), with norm prices set by the Petroleum Price Board to limit transfer pricing manipulation.

The same 2022 reform shifted the special tax from a profit base to a more cash-flow-based model by introducing immediate full expensing of investments replacing linear depreciation. According to Kaski, the system delivers on three levels: investment neutrality, ensuring that projects viable before tax remain viable after tax; revenue stability, with the state's net cash flow from petroleum activities peaking at around USD 135 billion in 2022 and projected at USD 63 billion in 2025; and intergenerational savings, as all proceeds flow into Norway’s sovereign wealth fund, which now exceeds USD 2 trillion.

The case for international coordination: perspectives from Spain and Ghana

In the subsequent discussion, Francesc Pont, Head of the International Economy and G20 Unit at the Spanish Prime Minister’s Office, argued for renewing the EU’s 2022–2023 solidarity contribution and embedding windfall taxation within a coordinated European framework. He referenced a joint proposal involving Spain, Austria, Germany, Italy, and Portugal, stressing that purely national approaches face significant limitations. IMF analysis, he noted, supports resource-rent taxation as both revenue-generating and economically non-distortionary.

Daniel Nuer, advisor to Ghana’s Ministry of Finance, and Brice Roinsard of the GSLTF broadened the discussion to the international level as well by linking it to ongoing negotiations on the UN Framework Convention on International Tax Cooperation.  Concerns were raised that the draft Article 4 on Sustainable Development remains too limited in ambition, with several governments – including the United Kingdom, Brazil, Jamaica, and Sweden – calling for stronger substance. Among the proposals under discussion is an internationally coordinated "polluter pays" surtax on the global profits of highly polluting industries, with revenues channelled through multilateral UN funds.

Key takeaways from the discussion

The discussion highlighted both the practical challenges and the growing policy momentum behind windfall profit taxation. A more effective tax design increasingly requires moving beyond affiliate-level taxation toward approaches based on MNE profits. While implementing such systems currently face administrative and legal bottlenecks, such as those related to access to global corporate data, speakers noted that existing Country-by-Country (CbCR) frameworks already provide an important foundation on which more comprehensive approaches could be built.  

Speakers also challenged the common argument that windfall taxes discourage investment or trigger capital flight. Since these taxes are designed to target economic rents – profits above the normal rate of return generated largely by external market conditions rather than productive activity – they are generally considered non-distortionary. As long as extractive projects remain profitable, companies should retain incentives to continue production and investment.

Historical experience reinforces this point. From excess profits taxes introduced during the First World War to the resource taxation measures adopted during the oil shocks of the 1970s, speakers noted that governments have historically implemented rates far higher than the European Union’s recent 33% benchmark without undermining production. Norway’s petroleum regime is also a strong contemporary example of a durable and economically viable high-rate resource-rent taxation system. 

The discussion ultimately underscored that there is no purely technical answer to what constitutes a "fair” windfall tax rate. While economic analysis can help identify efficient and administratively feasible models, the final choice remains fundamentally a political decision shaped by broader questions of equity, sovereignty, and the public ownership of natural resources.