“Businesses like making profits”, said Labor leader Julia Gillard on ABC’s Q&A on August 9. She was explaining why Labor opposed the Coalition’s proposal to raise the company tax rate by 1.5%. “If they’ve got to pay more tax and that’s going to cut into their profits, then they’ll think of a way of adding a bit more profit.
“What’s the best way of adding a bit more profit in? They put up prices.
“It, you know, just stands to common sense reason, doesn’t it?”
The Greens lead NSW senate candidate Lee Rhiannon agrees.
“The simple fact is that the majority of large corporations will do what ever it takes to generate increased profits”, Rhiannon said in a jointly-written article with Antony Loewenstein published on OnlineOpinion.com.au on August 12.
She added the “idea that industry should be left to make its own ethical decisions is both dangerous and misguided”.
On March 9, the National Independent Retailers Association’s CEO, Peter Strong, commented on Coalition leader Tony Abbott’s proposed company tax rate rise. He said it was “laughable to think that big business will not pass on the cost of this new tax”.
It’s true. Businesses do like making profits. It’s their reason for existence. No profits, no business.
If big businesses can think of ways to add to profit margins, including by price rises, they’ll do it — if they can get away with it.
But Gillard’s attempts to attack Abbott from the right (a feat on its own) by saying we should cut company taxes contradicts her own argument.
Why would companies act any different if the tax rate was 29% or 31% or 20%? It’s hardly a secret that a big problem with company tax is getting corporations to pay it — they dedicate large resources to finding legal loopholes to dodge or minimise taxes.
If businesses are solely in the business of making profit, they will always be looking to add a bit more profit — whatever the tax rate.
It’s just as easy to argue that by lowering company tax rates, companies will seek to increase profit margins by selling their products at the same price. Why pass on savings to the consumer if you don’t have to?
So much of industry is monopolised by a few large companies, reducing competition as a motive to lower prices. So lowering company taxes will simply give the government less money with which to fund social services without benefiting consumers.
Any move by a government that hits business will result in corporations seeking to respond in a way that maximises profit.
The fight over the then-Rudd government’s proposed tax on super-profits of mining corporations, since watered down by Gillard, reveals the logic. The corporations responded that the tax on their profits would leave ordinary people worse off — as they would respond to a slight fall in profits by providing fewer jobs and raising prices.
The latest multi million-dollar ad campaign by a group of mining companies not placated by Gillard’s compromise is even more blatant. The ads warn us we’re all going to “get whacked” by the new tax on their profits.
If this is true, it is because these companies, in defending their profits, plan to do the whacking.
What is not factored into the equation by the Coalition, Labor or most mainstream commentators, who see corporations “whacking” the rest of society in defence of profits as an immutable law of nature, is the possibility raised by Rhiannon.
That is, governments don’t leave big business alone to simply make its own decisions — decisions with big consequences for society as a whole.
In the case of the mining sector, we are discussing natural resources that rightfully belong to the people — the exploitation of which has significant consequences for society and future generations. How such resources are used is a big issue — not least due to the environmental stakes associated with the sector.
Why should decisions relating to the sector’s operations be made behind closed doors?
One initial step any government seeking to govern in the interests of people and the planet could take is to require corporations to provide full public access to information on all their operations.
To monitor whether mining corporations were truthfully complying with all requirements, employee and community representatives could be appointed to all decision-making bodies in the company.
Rather than leaving these corporations to their own devices, the public would have know whether our resources were being used in the best public interest, while ensuring taxes were being paid and adjusted upwardly to cap profits.
This could apply to other industries. Making large corporations open their accounts to public inspection would not just limit tax fraud. It would strengthen the hand of government regulation bodies that seek to stop price fixing and other practices that gouge consumers.
Any corporation that refused to comply with such regulations, or was found to be guilty of serious crimes, could be brought under state control.
In the case of the mining industry, increased state intervention could help ensure public resources were being managed in the public interest.
We could expect such measures to be resisted by the corporations. The well-funded campaign we’ve seen against a small tax increase indicates we could expect strong resistance to deeper encroachment on corporate interests.
To implement such a policy, a government would need the necessary courage to take powerful interests on. A government willing to take on such a fight would need to be willing to educate the public on the issues and mobilise working people to defend them.
We must have the courage and faith in the ability of ordinary people, if the case is put to them and they can see it is in their interests, to support such a campaign.
Our only other choice is to remain at the mercy of those who “will do whatever it takes” to find “a way of adding a bit more profit” to their bottom line.