“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 per cent. “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 in On Line Opinion 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 per cent or 31 per cent or 20 per cent? 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.
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