Let us go back to the boring subject of tax… except that it is not boring if you have to pay it, and it is anything but boring if you have to pay too much of it. The Greens are out of their box again, determined to tax anyone that makes money out of existence. It is worth pointing out that the government’s drive to increase wages, especially low wages, is a windfall for them, as it means they collect more tax. Don’t think for one second that they are doing this just to make people’s lives better.
The dreaded Julie-Anne Genter is on the warpath again. Having had a brief stint on a finance and expenditure select committee, she now sees herself as an expert in economics and taxation. But her politics are from the hard left, and so her aspirations are to strip even moderately comfortably-off people of their money to give to the poor.
We need a tax system that prioritises people over profit. Everyone should have enough to make ends meet and afford the basics of life – but right now wealth is out of balance in Aotearoa.
Oh well. I’m glad this is not happening in New Zealand. It never occurs to these people that if we focused on things that matter, rather than all the endless virtue signalling, we might be able to make people’s lives better after all.
Meanwhile, massive Australian-owned banks make eye-watering after-tax profits, with ANZ alone posting a record $2 billion; supermarkets rake in an excess profit of well over $1 million, every single day; and one energy company has presided over a 600 per cent increase in their takings.
Excess profit is by definition unearned. It is a result of external circumstances, and existing market power, which allows a few big corporations to get away with charging higher prices than their costs justify.
Excess profits may sometimes be the result of external circumstances, but it is simply untrue to say that they are ‘unearned’. Fairies do not suddenly appear at certain times to fill the coffers of banks and oil companies. As far as I am aware, banks are doing everything much the same as they have always done. If the ‘external circumstances’ that she refers to are higher interest rates, it is worth pointing out that banks are paying higher interest for their loan funding too; this is not a windfall.
And exactly who caused the higher interest rates by printing large swathes of money during the pandemic? Why, that would be the current government, who knew the likely effects of quantitative easing would be increased inflation, but did it anyway. Now they blame the war in Ukraine, supply chain issues, Chinese lockdowns… anything but their own actions.
So I think Ms Genter should look a little closer to home in her acid rant against the banks, supermarkets and oil companies.
These corporates are benefiting from the Government’s economic response to the Covid-19 pandemic and global inflation.
To date, the main players commenting on the cost-of-living debate have missed the contribution of market power and corporate super profits to inflation.
Hmmm… supermarkets benefited from the government’s economic response to COVID? Well yes, that is true, but let us not forget that the government closed down all the competition to supermarkets by refusing to allow them to operate during lockdowns… so no butchers, bakeries or greengrocers were allowed to trade. Some of those ‘superprofits’ came from a lack of competition, driven wholly by government policy.
Earlier this year, Revenue Minister David Parker said he would “[shine] a light on unfairness in our tax system”. Well, Minister, large corporations making a killing in profits, while tens of thousands of families struggle to make ends meet, is just about as unfair as it gets.
Does Genter not realise that the banks, supermarkets and oil companies will all be paying tax on these ‘superprofits’? Presumably, she does, but of course, she wants to see windfall taxes applied to excess profits, meaning that these ‘superprofits’ will be taxed at a higher rate.
On Sunday we once again put forward a proposal to rebalance our economy to support the majority and not just a privileged few. Our ideas, which are open for feedback, centre around the introduction of a new excess profit tax. A one-time tax on a large corporation or industry that is benefiting from a change in economic conditions they did nothing to bring about.
NZ Herald
Genter conveniently forgets that banks did a lot to help their customers in the early days of the pandemic, giving people grace periods for paying their mortgages and getting alongside businesses to restructure loans and overdrafts. This will have resulted in reduced profits for them in the short term, but it counts for nothing when you view the world through a red-tinted lens.
Taxation 101 states that taxation must be fair, but these proposed windfall taxes would be applied retrospectively. This is contrary to the fundamental principle of taxation; there is nothing fair about having to pay tax when you knew nothing about it in the period in which it falls. To make it worse, the Greens have not stated what tax rate they wish to apply to ‘superprofits’, meaning that not only did the companies not know they would be taxed at a higher rate, but they don’t know what the tax rate is likely to be either. Add into the mix the fact that no one knows how to determine at what income level the superprofits start, and you have a recipe for disaster.
Along with their proposal to introduce a wealth tax, meaning people would have to pay tax on the value of their assets (when many people own houses now supposedly worth more than the $1 million threshold, once again due to government policy), this taxation proposal is essentially inequitable and unworkable. But don’t write them off as hard-left dreamers just yet. While we all hope that there will be a change of government next year, there is always a possibility that Labour might squeak in with their coalition partners, the Greens and the Maori Party. Last election, the Greens tried to make their wealth tax a bottom line for coalition talks. We all know that they could do that again, and this time they just might succeed.