The truth about the mining tax
It has become increasingly apparent that the
onus is on citizen bloggers to inform the Australian public of the
truth. We certainly can’t rely on our politicians who are too busy
misrepresenting the facts to make the other guy look bad. And we can’t
rely on our mainstream media who, in many cases, are under editorial
instruction to present a certain view.
Today I would like to discuss that “anti-Western Australia” mining
tax and put pay to some of the lies being repeated over and over from
the Coalition script du jour. I wonder if they realise how annoying it
is to listen to them repeat the same trite phrases regardless of who is
being interviewed. This, to me, indicates that they either do not have a
handle on the subject matter (I’m looking at you Tony) or that they are
deliberately obfuscating the issue with whatever spin the advertising
gurus tell them will resonate. Either way, it is treating us with
contempt.
Most of our mining companies are majority foreign-owned and are
receiving a huge windfall at the Australian taxpayer’s expense. Remember
that these minerals are a finite resource – when they run out the money
stops coming in. In 2001, mining companies paid approximately 40% of
their profits as royalties to the state governments. Today they pay less
than 20%. Clearly, there is a strong argument that the Australian
people deserve to receive a greater share of today’s profits.
While parts of the Australian economy have benefited from the
resource boom, other parts have suffered. Strong demand for our
resources has pushed the Australian dollar higher, hurting farmers and
manufacturers who export Australian-made products as their products have
become more expensive to foreign buyers. The higher dollar has also
impacted tourism and our foreign-student education industries. As a
result, we have what has been described as a two-speed economy. The
miners and associated service industries are doing very well, while our
exporters are suffering.
The tax, levied on 30% of the “super profits” from the mining of iron
ore and coal in Australia, was to be paid when a company’s annual
profits reach $75 million, a measure designed so as not to burden small
business. This affected approximately 320 companies. The money raised
was to be spent on pensions, tax cuts for small businesses and
infrastructure projects, particularly in Queensland and Western
Australia.
Professor Ross Garnaut said, when the tax was proposed, that it would
be a test of whether difficult economic reform remained possible in
Australia, or whether powerful interest groups now had too much sway
over the political process. I guess we have our answer.
When Australia’s richest person, Gina Rinehart, led a $22 million
advertising campaign against the mining tax, the Labor Party succumbed
to the bullying and allowed BHP Billiton, Xstrata and Rio Tinto to make
up the rules. This was a huge mistake brought about by blackmail – give
us what we want or we will make sure you lose the election. The
concessions made meant that a proposed reduction of company tax could
not go ahead so the miners not only screwed the Australian public, they
also cost other businesses this concession.
Mathias Corman has been popping up everywhere saying that scrapping
the mining tax will save the budget $13.8 billion. This is a ridiculous
thing to say. How can cutting revenue save money? In fact, Hockey’s own
dubious figures show that axing the tax will cost the budget $3.4
billion over the forward estimates. The mining companies were given
generous accelerated depreciation concessions which, while they were in
investment phase, they could write off against their record profits
cutting the amount of tax due. Now, as they are moving into production
phase, revenue is set to increase significantly into the future.
There have been two main arguments put forward against the mining
tax. The first was that it would be a deterrent to investment, an
assertion not borne out by the facts. A report by PriceWaterhouseCoopers
says the possible repeal of the mining tax in Australia is unlikely to
have much impact on Australia’s appeal to investors and that fluctuating
commodity prices are much more of a determinant for future investment.
Another report recently released by the Chamber of Minerals and
Energy of Western Australia found a number of factors are constraining
private investment levels including a shortage of long-term, integrated
planning for infrastructure, project structuring complexity, and a
general investor aversion towards greenfield infrastructure projects.
Still no mention of the mining tax.
In a glaring example of how Tony Abbott is willing to mislead the
Australian public, he blamed the delayed expansion of the Olympic Dam
project on the mining tax, even after it was pointed out to him that the
mining tax only applies to iron ore and coal, not to the copper,
uranium or gold extracted from the Olympic Dam mine. Stupidity is one
thing, cupidity is another.
The other emotional string pulled in the mining tax debate is that of
jobs. Whilst the mining sector contributes about 10% to GDP, it is not a
big employer (currently 2.4% of the workforce) and this is set to fall
as they move into the less labour-intensive production phase. Since the
announcement of the repeal of the mining tax we have continued to see
many job losses in the mining industry.
From a peak of 85,819 positions last year, the construction element
of the resources boom is expected to dive to just 7700 in 2018, with
78,000 jobs lost, according to the 2013 resources skills study released
in December by the Australian Workforce and Productivity Agency. Job
losses are expected to be gradual in 2014 – down to 83,324 – and then
rapidly accelerate to 2018.
The dive in construction jobs will be only partially offset by a rise
of nearly 40,000 resources operations jobs, led by the oil and gas
sector where employment should rise from 38,943 this year to 61,212 in
2018. Mining operations jobs should increase by 17,560 from 236,690 this
year to 254,260.
In fact, repealing the mining tax will cost jobs as mining profits
are stripped from our economy and sent to overseas investors. Instead of
those billions circulating through our economy, they will be lining the
pockets of foreigners.
The arguments about investment and jobs being dependent on the mining
tax have been refuted from every corner, including the industry itself,
and by every study that has been done. It is quite simply a lie and the
government knows it, or at least they should if they have read any of
the countless reports done on the matter. But there will be a cost and
it will be us that pays. Tony’s pander to Gina will see
1. The abolition of the low income superannuation contribution
2. Unwinding the instant asset write-off for small business
3. Delaying the superannuation guarantee increase so it remains fixed at 9.25 per cent until 2016–17
4. Discontinuing the company loss carry-back, a benefit for small businesses
5. Dismantling the accelerated depreciation for motor vehicles
6. Ending geothermal exploration treatment
7. Scrapping the Income Support Bonus, which includes payments to the
children of veterans and is a lump-sum supplementary payment made twice
a year to people on certain income support payment
8. Abolishing the Schoolkids Bonus, a lump-sum payment to parents of
school-aged children twice a year, even though this payment was not
attached to the mining tax and was introduced to replace an existing
education tax refund.
Mining shareholders will be smiling, a smile paid for by our children, our workers and our small business owners. Thanks Tony.
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