Tanzania may decide against a windfall tax on production, which had been considered as part of the National Natural Gas Policy (NNGP). It is now considered that a windfall tax might not be appropriate in the initial stages of natural gas extraction, although the imposition of a windfall tax has not been ruled out altogether. Tanzania has experience of considering windfall taxes having previously considered and rejected the possibility of a windfall tax in respect of gold production. A windfall tax is normally levied in a situation where a particular industry is seen to have benefited from an unexpected situation that has enabled them to make unforeseen profits or gains. A government can often win public approval by levying a windfall tax and dedicating the proceeds to a particular social goal.
However windfall taxes may have disadvantages such as creating uncertainty among companies operating in a country and deterring potential investors. They may also have a negative effect on the liquidity of companies in the industry concerned and could even have an adverse effect on employment in the industry.
