war-profits principle

economics

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June 17, 2026

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The war-profits principle is one of two methods for determining excess profits for taxation. This principle aims to reclaim wartime income that exceeds a taxpayer's normal peacetime profits. This type of tax was first implemented during World War I to generate revenue and control profits made due to the war. Similar taxes were applied during World War II and the Korean War in many countries. The economic impact of such taxes is evaluated based on their effectiveness in stabilizing the economy by capturing wartime windfalls and their influence on incentives, production, and business spending.1

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excess-profits tax
One, known as the war-profits principle, is designed to recapture wartime increases in income over normal peacetime profits of the taxpayer. The other, identified as the high-profits principle, is based on income in excess of some statutory rate of return on invested capital.
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One, known as the war-profits principle, is designed to recapture wartime increases in income over normal peacetime profits of the taxpayer. The other, identified as the high-profits principle, is based on income in excess of some statutory rate of return on invested capital.
Read More