fluctuating taxation

The Government of India has also increased the windfall tax on crude oil and Aviation Turbine Fuel (ATF) and its export tax on diesel. Russian oil is reportedly being bought well below the $60 per barrel cap set by the West’s sanctions regime, even though global market prices are much higher, with producers making extraordinary profits. Given its huge spending needs, the Center was quite willing to take some of this to keep its fiscal deficit under better control. Many other countries have also imposed such a tax. But hydrocarbon markets are volatile and the frequency of unexpected tax changes has been worrying. It is not even a month since India’s unprecedented levy was cut due to softening global prices. The problem with a tax operating in conditions of volatility is that it is in constant need of adjustment. This puts businesses on edge, holding their calculated liabilities hostage forever. This is a big blow to the investors. Tax stability has its own value. Taxation regimes that change their burdens are often taken as an indicator of high policy risk. One-time taxes got legitimacy after the commodity boom in the rare circumstances of Covid. But they must be handled with caution.