04 April 2014
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 paid 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.