The Federal Government’s RSPT tax on mining companies continues to be the biggest political battleground as we head into another week of pre-election squabbling and electioneering.
It’s an issue far larger than just pure hip pocket economics — class, geography and ideology all underpin a lot of the strong passions keeping the debate running hot. Is the government siding with ordinary working Australians against Big Mining? Or conspiring against the future of our blue collar workers by punishing a booming industry and employer?
A panel of officials are set to give their analysis on the proposed tax at the end of the week, but the Oz is reporting today that they will recommend the government scraps its promise to bear 40% of the cost of failed mining projects — sure to go down like a lump of iron ore.
Meanwhile, the Opposition is claiming the Government’s maths are irresponsible and based erroneously on a paper by an American college student.
In WA, the tax is being blamed for a sudden drop in local company stocks, and former ALP member Scott Cowan has launched an entire party to fight the tax, arguing it’s all about giving more money to Victoria and NSW at the state’s expense.
And the debate is only set to get hotter, with the mining industry today launching an advertising blitz on radio and the internet, with its Keep Mining Strong campaign.
[youtube]https://www.youtube.com/watch?v=LYyapf_8oQo[/youtube]
In today’s Oz, Treasurer Wayne Swan puts his case for the tax:
… the RSPT will broaden and strengthen the economy, ensuring all sectors grow in a sustainable way.
Here’s how the pundits have responded:
The Australian
Andrew Main: Ditch the mining tax safety net
The government may have to change this tax; ironically, the first concession should be the removal of the tax loss safety net.
Sydney Morning Herald
Editorial: Rudd’s tax hatefest worry
… we need more clarity and rigour.
Ross Gittins: Shonky advisers have led Rudd badly astray
… the resource tax is so pure – so carefully designed to ensure it doesn’t do all the bad things it’s being accused of – that it’s impossible for anyone who’s not a paid-up economist to understand.
Neale Muston: High price paid for resource tax’s poor implementation
Unfortunately the government has fallen foul of ill-timed and poorly executed implementation, and that has cost all Australians far more than this tax will recoup for several years to come.
Max Walsh: Rudd government squanders political capital
The Rudd government is fast earning Australia the harmful reputation of posing a sovereign risk to investors.
Courier Mail
Dennis Atkins: Mining industry readies advertising campaign against super profits tax
… the debate was out of control last week … This week won’t improve, with a doom-and-gloom advertising campaign
Daily Telegraph
Peter van Onselen: Kevin Rudd’s government’s mining tax continues to dominate Australian political debate
… its preparedness to take on 40 per cent of the risk for ventures that make a loss… is an entirely unrealistic policy for any Government stick to and the mining community knows it.
ELSEWHERE…
Business Spectator, Robert Gottliebsen: Rudd’s dollar delusion
I can’t recall a government action that has caused so much global consternation.
The Government has really been amazingly adroit at screwing itself over lately. After butting my head against more economics than is good for somebody, I think I half-understand the tax. To name it the super profits tax (I’m guessing most opponents to it ignore the ‘resource’ at the beginning) was either incredibly cynical, a blatant sign that they don’t understand the reform, or likely a mixture of both.
I’ll say I agree with it in theory but there are a couple of technical concerns (cribbing from Ross Garnaut).
Andrew Mains’ point is the most interesting – are miners just dead set against having their risks (and potential rewards) cut? And should the rest of us accept that, or is it fair enough to say that if miners want to play roulette with our assets, sorry, we own ’em, we’re going to a proper cut, and we’ll be nice enough to chuck in our own stake.
The amount of rubbish being peddled in the media about this issue has been beyond belief (on both sides of the argument)
But the effective tax rates take the cake. Perusing the company tax info from taxation statistics 2007-2008, you get the following stats about the mining industry
No of companies =4290 (representing 0.6% of all companies)
Total Income = 160,323,192,189 (representing 7.1% of all income)
Taxable income = 29,010,243,407 (representing 12% of all taxable income)
Net Tax paid = 8,068,463,151 (representing 14% of all tax paid by companies)
Effective taxation rate =Net Tax paid/Taxable income) = 27.8% (against the total effective rate across all industries of 24.6%)
To say that they are being taxed at 13-17% is pure fantasy.
@ Scott – I’m not sure, but I think that 13-17% percent figure specifically leaves out royalties as they’re not so much a tax but the cost of acquiring the assets they’re digging up.
The mining industry can’t be doing so badly if it’s concurrently running expensive misinformation campaigns on tax and climate science.
@Sancho – It’s a cute idea, but the miners are:
i) feckin loaded
ii) able to call on their easily bamboozled mates in the media
but another point may be that while they have launched a talkback radio campaign today, they don’t yet have the confidence to launch one on TV. Is this because they’re a bit scared of how it might go down outside WA?