A Greens plan to slap tens of billions of dollars in new taxes on big businesses has drawn warnings a key part of the policy would damage the economy and cost workers jobs.

It comes as big companies like Coles, Woolworths, Commonwealth Bank and Westpac have all started to report more than $1 billion in profit from the past financial year in recent weeks.

Greens leader Adam Bandt unveiled a three-pronged plan to draw an estimated $514 billion in new tax revenue over the next decade on Wednesday, saying corporations must pay more.

The Greens’ policy includes a 40 per cent profits tax on many companies with turnover over $100 million and additionally new taxes on profits made by large mining and gas companies.

Economists said the first plank of the plan would deliver lower economic growth and higher unemployment, but two leading experts did back reforms to taxes on resources companies.

There has been widespread anger over the profits of major businesses. Photo: Getty/The New Daily

“When you’ve got natural resources that are effectively the property of all Australians – we see these sovereign wealth funds in so many countries and we should do that,” economist Nicki Hutley said.

The effect on consumer prices under the tax plan is unclear though, Hutley explained, because that also depends on levels of demand.

Greens tax plan

University of New South Wales Professor Richard Holden slammed the Greens’ tax plan as “incredibly dangerous”, arguing it would cause businesses to shift their capital overseas.

He said that would also reduce government revenue from other sources, like income tax.

“Economic growth will be weaker, unemployment will go up, but we will also not get a lot of that tax revenue,” Holden said.

“We could, in fact, overall get less tax revenue.”

The Parliamentary Budget Office (PBO) has itself raised uncertainty over estimates of how much revenue the profits tax would bring in, stressing that it doesn’t account for the impact the policy itself would have on the economy.

The estimates published by the Greens are based on profit figures published by large companies between 2013 and 2022, reflecting economic and market conditions prevalent over that period.

‘Windfall’ target

Bandt has sought to head off criticism that the tax plan would spark an exodus of capital, saying on Wednesday that firms covered by the tax – like supermarkets and banks – couldn’t relocate.

Bandt also said the tax would only target “windfall” profits and that the plan would not prevent investment in companies which are earning moderate capital returns (profits) for shareholders.

But details announced by the Greens suggest the plan could actually cover large swathes of the Australian market (though it’s unclear exactly how the eligibility threshold would be calculated).

Under the Greens plan companies are exempted from paying if “shareholder returns” are lower than 5 per cent plus the long-term bond rate (about 4 per cent).

That’s lower than the average total ASX return in 2023, which was more than 10 per cent including dividends and capital gains.

Some public companies would be exempt because their revenue was lower than $100 million.

Businesses that are covered would also earn tax credits that they could utilise to reduce their bills in future years, which the Greens say should safeguard against economic downturns.

Hutley said that while the profits companies are making are an important issue, a broad tax on corporate returns wouldn’t necessarily fix the problem without clear downsides.

“I can’t imagine raising tax on profits would not have some impact on unemployment,” Hutley said.

“Somebody always pays for this.”

Supermarket price impact

The effect on prices consumers pay at the supermarket if Coles and Woolworths were taxed under the plan is unclear though, Hutley said, because that depends on things like demand.

“You’ve got to be careful about what it is you’re trying to treat and how it is you’re trying to treat it,” Hutley said.

“Some of the things Bandt is worried about would be better with a more effective regulator.”

Veteran economist Saul Eslake said that a profits tax would affect other parts of the tax system, including a resulting increase in franking credits for investors and less revenue from capital gains taxes because company share prices would be lower than otherwise.

He explained Australia already collects 6.6 per cent of domestic production (GDP) in company tax, which is more than any other OECD country with the exception of Norway.

“The argument Australia ought to be collecting even more in company tax than it already is – or that attempting to do so wouldn’t have any adverse consequences for investment, employment or economic activity – is very thin,” Eslake said.

Resources taxes

But both Eslake and Hutley did offer support to reforming Australia’s Petroleum Resource Rent Tax (PRRT), saying it has failed to properly tax the exploitation of domestic gas reserves.

“The PPRT has failed to collect an appropriate share for the Australian people,” Eslake said.

The Greens have proposed raising an estimated $218 billion over 10 years through a PRRT crackdown and an additional 40 per cent tax on the “super profits” of large mining projects.

Hutley said mining taxes are “a completely different thing” to the first plank of the Greens plan.

“When you look at the super profits from the Ukraine war, why should Australians be forfeiting that?” Hutley said.

A way to raise revenue?

Bandt also faced questions on Wednesday about how governments can better crack down on tax avoidance by large companies, reflecting concern that firms will seek to evade higher taxes.

He said the Greens would announce further policy on multinational tax avoidance before the next election, and that the problem was no reason to shy away from increasing taxes more generally.

But the design of tax policy has significant bearing on how easy it is to avoid, Eslake explained.

He said multinational technology companies should pay more tax, but that this should be done through taxes on revenues – not profits – because it’s harder for companies to “miss-state”.

Academic literature has found that profit-based taxes are more susceptible to avoidance strategies like transfer pricing, a practice that’s been used widely by tech firms like Apple, Google and Meta.