A lot of large companies managed to achieve billion-dollar profits last year. However, more and more people are struggling to make ends meet due to the higher cost of living. Hence, a lot of people are critical on these high profits. Aart Gerritsen, Assistant Professor at Erasmus School of Economics reflects on these high profits in an item by Nu.nl (20 February 2023).
The rise in the cost of living means that products become more expensive. But, even if companies manage to make high profits, they are still unlikely to lower their prices, says Gerritsen. However, he does note that via the profit tax a part of the high profits flow back to the consumer in the form of higher tax revenues. And he remarks, the Netherlands already has a solidarity tax on the higher profits, albeit only for energy companies.
The Assistant Professor explains that there are two ways to look at these higher profits. On the one hand, you could say that these companies make high risk investments. High profits are therefore fair. On the other hand, high profits can be one of the indicators for too much market power. Too much market power means companies can raise prices easily, which can be seen as concerning.
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For the full item by Nu.nl, 20 February 2023, click here.
