Contributed by Jim Hayes

Peter Martin, who is a visiting fellow at the Crawford School of Public Policy of the Australian National University (ANU), wrote an article about the Green’s proposal for a super profits tax. This article has just been published by The Conversation (4 September 2024).

Given the lacklustre state of the Australian economy and the attacks on the proposal by the organisations representing big business and the major parliamentary parties, Martin’s article is timely.

He rightfully points out that the Green’s proposal isn’t that radical. That in fact, the Business Council of Australia (BCA) had itself proposed something similar 15 years ago. The proposal was submitted to the Henry Tax Review.

Labor proposed its own version in 2011. Wayne Swan was the treasurer then and today’s Treasurer Jim Chalmers was then Swan’s chief of staff. By then the BCA reversed its position and became a vigorous opponent of the tax as part of a campaign against the Labor government.

Former Labor Treasurer Wayne Swan championed the super profit tax

Both the BCA and Labor with Chalmers are now leading the condemnation of what they once supported. This begs the question. Why was a super profits tax good before and bad now?

Back then, big business was demanding government rescue in the aftermath of the 2008-9 global financial crisis and how this impacted on Australia.. Government needed money to hand out to prop up the big banks and other major corporations deemed too big to fail. Other means to achieve the same end were found. Money was taken from ordinary taxpayers and other uses, and the proposals for a super profits tax were shelved.

The old proposals were hardly draconian. The one from the BCA suggested that corporations having monopoly characteristics could pay when profit exceeded 4 percent of shareholders’ equity. This is a company’s total assets less liabilities. The tax would be balanced with a reduction in the company tax rate.

The main difference with the Green’s proposal is that it is more generous. Put simply, it allows affected corporations a break in paying super profits tax for up to 9 percent of shareholders’ equity. That above would relieve small businesses. Add the condition that the corporation must show monopolistic characteristics exempts some quite large businesses.

The CFMEU had put its own call for a super profit tax earlier this year to raise half a trillion dollars to fund massive social and affordable housing build. This was a significant factor putting them further offside with the Albanese government and big business.

The CFMEU put forward its own proposal for a super profit tax this year

It will be the banks, supermarket chains, telecommunication corporations, mining and oil companies, and media high tech empires that would lead the list of those that must pay. This is the rub. They don’t want to be taxed and are behind the campaign to delegitimize the proposal. and they use their influence over the political system to this affect.

Peter Martin argues that normal company tax could be cut. This loses its gloss when the reality is that there are so many holes in the corporate tax law that most pay little of this tax and quite a few get to pay nothing at all. Without changing this, any tax cut only exists on paper and not in the real world.

If the notion that everyone should pay some tax, it must include businesses registered under the Corporations Act and do so on a scale in line with the level of gross profits, without a mountain of discounts that counters this. This is how income tax on wages is calculated. Struggling businesses could pay less and those doing well could pay more. This would add social equity and provide funds for the wellbeing of society and the economy.

The Greens are not currently proposing such a change to normal company tax. This doesn’t mean that their super profits tax proposal shouldn’t be supported. In today’s climate, this is more important than ever.

Australia is in the clutch of a real cost-of-living crisis. Price gouging by monopolies is a significant part of this. Government services are generally lagging what is needed. Non-monopoly businesses are finding it hard to survive and record numbers are going to the wall. a super profits tax would spread the burden more evenly and fairly.

All of this and the present tax regime are pulling the economy down, and this means harder times for most. A change in direction is needed, and a super profits tax can be an important part of this change.