Monday, 11 September 2023
Private Members' Business
Taxation: Corporate Profits
Inflation and the cost of living are hitting hard. Rents are up, mortgage payments are up and the cost of food seems to be spiralling out of control. Every day we are greeted with a new statistic that tells us what we already know; this economy is not working for people but instead for giant corporations. You do not have to look much further than the superprofits that companies in Australia are making: Coles, $1.1 billion; Woolies, $1.6 billion; Qantas, 1.7 billion; BHP, $13.4 billion; and Woodside, $1.7 billion so far in this year alone. At the same time, real wages are stagnant and have even been going backwards. Inflation is still sky high. Our wages are buying less today than they did before 2020, and mortgage repayments and rents are spiralling out of control, impacting everyone and having an acute effect on young people.
We talk to our friends, our families and our co-workers, and almost everyone shares the same story. It's getting harder and harder to get by. The cost of living, which in itself is just a dystopian phrase, is increasing faster than our wages can keep up with. This story is now backed up by the statistic that Australia has slipped into a per capita recession. It is hard to deny the simple truth about our economic system. Something is very wrong. So, if wages are not the primary driver of inflation, then what is?
The Australia Institute, the OECD and the IMF have all come to the same conclusion in the last few months. Corporate profits and price gouging are the primary causes of inflation. The analysis from the OECD covered eight countries, including Australia, and the eurozone. It showed that the contribution of unit labour costs, or wages, to overall inflation was much smaller than in the 1970s and that higher unit profits have been the leading component of recent inflation in several of those countries, including our own. The IMF report also found that rising corporate profit margins accounted for 45 per cent of inflation in Europe since the start of 2022.
So, if corporate profiteering is driving inflation and causing this cost-of-living crisis, then what is the solution? Increasing interest rates, the Reserve Bank's answer, simply punishes households for a problem that they did not cause. A superprofits tax is the answer. It addresses the primary driver of inflation while providing the government with tax revenue to fund essential public services, easing the cost of living and giving people room to breathe.
The Greens have proposed a 40 per cent tax on the superprofits of companies with over $100 million in turnover, including multinationals. The tax would apply to net revenue after deducting income tax and making an allowance for a fair return to shareholders. This would raise $53 billion over three years that could be invested into improving quality of life for all Australians. This tax alone would pay for universal child care and bring dental and mental health completely into Medicare, with change left over. That is how you address a cost-of-living crisis driven by corporate greed. And superprofits taxes already exist. Australia would not even be walking an untrodden path. Norway's superprofits tax on oil and gas corporations generated $139 billion for them last financial year. The UK, Spain, France, Germany, Finland and many other countries have all either implemented or proposed superprofits and windfall taxes in recent times. But what do we get in Australia? Nothing.
We are told by this government that the superprofits of fossil fuel companies are untouchable, that the superprofits of banks—made off the backs of people struggling to pay for shelter—are the banks' birthright. We are told that when giant corporations are doing well we must leave them alone. Their profit margins are never to be questioned. But when giant corporations fall on hard times we must bail them out.
Our current economic system has proven itself to be stagnating and structurally incapable of living up to the expectations of neoliberal capitalism. Soaring corporate profits have not translated into a better quality of life for everyone else. This rising tide has not lifted all boats, and many have just sunk. People are calling out for an overhaul. A superprofits tax to pay for universal public services that are free at the point of use is the first step in that overhaul.