tax on the excessive part of really excessive profits last week, business and the government acted as if the sky was about to fall in.But the principle behind the idea is a good one — as Labor and the Business Council should know better than anyone.At the heart of the Greens' idea, as well as the idea put forward by the Business Council 15 years ago, is a two-tier system of company tax.
As soon as one firm worked out how to earn a good deal more than the cost of borrowing, other firms would borrow to enter the market and undercut it, whittling away the excess profit.In each, the profits aren't whittled away by new entrants because it's hard for new entrants to gain a foothold.
The system we've got at the moment pushes firms into debt. If they try to raise money from shareholders, they are made to pay tax on the returns they pay out as dividends, whereas if they borrow, their interest payments are tax-deductible., which is what the Greens are calling their proposal, would treat debt and equity the same for all firms other than those collecting super-profits.