The Green Party is proposing a windfall tax targeting excess profits. Photo / 123rf
The Green Party is calling for a one-off tax on large companies making record profits of late due to high inflation fuelled by the pandemic, energy crisis and Russia’s invasion of Ukraine.
Under the windfall tax proposal, the money raised would then support people struggling with the cost-of-living crisis.
“An excess profit tax would be a simple and effective way for large corporations to pay their fair share, unlocking the resources all of us need to live with dignity, put a roof over our heads and food on the table,” Green Party finance spokeswoman Julie Anne Genter said.
A windfall tax is a high tax rate on a certain industry when it suddenly makes large profits due to something for which they were not responsible.
One has been introduced for energy companies in the United Kingdom as they profit off rising oil and gas prices due to the disruption caused by Russia’s invasion of Ukraine.
There, energy companies will pay an additional 25 per cent tax for the next 12 months on their “windfall” profits, netting £5 billion or NZ$9.6b.
In New Zealand, corporate profits are on track to soar 60 per cent over the past two years.
New Zealand’s biggest bank, ANZ New Zealand, last week posted a 20 per cent increase in net profit for the year ended September of $2.3 billion
Genter also pointed to the massive profits from supermarkets, raking in more than $1 million per day, and the banking sector.
“As people struggle to pay the mortgage and their rent, Australian-owned banks are making record profits of over $6 billion.
“As tamariki go to sleep shivering, energy companies are generating eye-watering profits.
“And yet, having done nothing to earn it, nearly every dollar of excess corporate profit is going straight into the padded pockets of shareholders and corporate executives - rather being shared amongst all of us.”
The party has today released a discussion document on how such an excess profit tax could be designed - and how the additional revenue should be spent.
It suggests a windfall tax could be applied to banks, fuel companies, supermarkets, building products suppliers and energy generators/retailers (gentailers).
There is no specific rate mentioned, but one suggestion is 11 per cent to bridge the gap between the company tax rate - 28 per cent - and the top income tax rate or setting it closer to 50 per cent, recognising the “effectively unearned nature of excess profits”.
The document suggests a range of methods the funds could be redistributed, including extending the cost-of-living payment, a range of one-off subsidies and even setting up a sovereign wealth fund that could provide grants for “environmentally and socially beneficial programmes”.
Genter said they were also considering the alternative of raising company tax rates so that all profits were taxed more. The discussion document suggests the current company tax could be increased to 33 per cent, generating over $3 billion dollars in annual revenue.
In Australia, the main company tax rate is 30 per cent.
Greens co-leader James Shaw has previously called for a windfall tax for fossil fuel companies, which were making extraordinary profits as a result of the “supply crunch”.
His comments came after United Nations Secretary-General António Guterres called on developed economies to “tax the windfall profits of fossil fuel companies” and send revenue to countries suffering from the climate crisis and those struggling with high food prices.
Asked recently about a windfall tax Finance Minister Grant Robertson did not reject it, but did not directly support it either.
He said Labour was still working on its tax policy for the next election.
“In New Zealand we have had a few cracks at what we might do to have a broader-based tax system, but for this term, we have made the commitment that we have made (no new taxes) and we are sticking to that.”
National Party finance spokeswoman Nicola Willis has previously shot down the idea of a windfall tax, saying her party did “not support a new super tax on business”. Her main concern was the “volatility and variability” in profits across and within different sectors of the economy.
National is campaigning on tax cuts across the board – including scrapping the Labour Government’s 39 per cent rate for those earning more than $180,000 per year. National argues that New Zealanders deserve more money in their pockets amid the cost-of-living crisis.
Act leader and finance spokesman David Seymour previously told the Herald he thought an excess profits tax would not work.
“For an excess profit tax to work, the state needs to know what is a reasonable return to the risk taker. If it overshoots and discourages risk taking then we end up with less investment.”
The announcement comes after a recent report from Oxfam ranked New Zealand 136th in the world on the fairness of its tax system.
Oxfam called on the Government to introduce a wealth tax, which is also supported by the Green Party.
The Greens have suggested a wealth tax of 1 per cent could be applied to those with a net wealth of more than $1 million.