The devastating effect of excess corporate profits on inflation in Aotearoa - and a call for better taxes to fix the problem - is outlined in a timely report published today, as tax becomes a major issue this election year, says the Better taxes for a Better Future campaign.
The Profit-led inflation in Aotearoa report shows that corporates in Aotearoa made a $16.7 billion increase (39 percent) in profits in the 2021 financial year and a $10.2 billion increase (17 percent) in the 2022 financial year.
The report suggests these excessive profits contributed to more than half the country's domestic inflationary pressure - more than wages and government expenditure combined.
"This report points to something we've been concerned about for some time - that corporates in Aotearoa have taken advantage of the pandemic to make excessive profits," says Better taxes for a Better Future spokesperson Glenn Barclay.
"Tax is one of the important tools that governments can use to rein in corporate profits," Glenn Barclay says. “For years company tax rates have been declining globally, including in Aotearoa New Zealand. While our company tax rates are middle of the pack globally, there is a case for looking at whether the current rate of 28% should be increased.”
“We definitely think that we should also be looking at an excess profits or windfall tax,” says Glenn Barclay.
“The report points to Spain, where among other measures, the government moved to tax excess profits, which worked to reduce inflation remarkably quickly.
"But it's also important to ensure that revenue raised this way is used to build resilience into our economy and our people, not to fund tax cuts.
"If we don't get to the root causes of inflation, so clearly outlined in this report, and start making big corporations pay their fair share, Kiwis will continue to struggle with the cost of living," says Glenn Barclay.
Glenn Barclay also welcomed the report's call for a comprehensive capital gains tax (excluding the family home), a levy on the larger banks, and new taxes on wealth.
"These are all progressive ideas - they've worked overseas and will work here in Aotearoa too."
Alongside ActionStation, First Union, the Council of Trade Unions and 18 other organisations, the Better taxes for a Better Future campaign is calling for a tax system that:
- raises more revenue to enable us to address the social, economic and environmental challenges we face.
- ensures people who have more to contribute make that contribution: that we gather more revenue from wealth, gains from wealth, all forms of income, and corporates.
- makes greater use of fair taxes to promote good health and environmental health.
- addresses the tax impact on the least well-off in our society.
- is fully transparent, for example, by requiring the disclosure of information on ownership and beneficiaries of entities such as trusts.