FEDERAL Treasurer Wayne Swan made a lightning visit to Perth this week, in an attempt to placate resources sector fears the government’s proposed super profits tax would cost up to half a million jobs and cripple the industry.
FEDERAL Treasurer Wayne Swan made a lightning visit to Perth this week, in an attempt to placate resources sector fears the government’s proposed super profits tax would cost up to half a million jobs and cripple the industry.
Mr Swan said he was in town to have a “constructive conversation with the business community” regarding the tax.
After spending the trip being grilled by the who’s who of the mining industry, he may not necessarily feel he achieved that.
According to Mr Swan, Australian’s taxation system was in need of modernisation if all Australians were to receive “fair value”.
“We do have a very strong resources sector and it will grow as we go forward, but what we need to do is to modernise the taxation system and recognise that Australians deserve fair value from their 100 per cent ownership of our mineral resources,” Mr Swan told a press conference.
“And of course Australians have not been getting fair value and those figures are there for all to see.
“At the beginning of the decade, $1 in $3 in terms of mining profits went to royalties. Now it's $1 in $7. The Australian people, the Western Australian people, have been short changed.”
“We want to use some of the revenue from this new profits-based tax to support others in the economy, particularly here in Western Australia, that put investment, particularly infrastructure investment, into the mining regions where they have difficult challenges; to give a tax cut to small business in particular; to cut corporate taxes; and of course to invest in superannuation, which is so important to our national savings.”
Whirlwind tour
The first stop of the tour was a Sunday evening soiree hosted by accounting firm RSM Bird Cameron.
Guests at the RSM dinner, including Rio Tinto Iron Ore boss Sam Walsh, Woodside Petroleum's Don Voelte and Alcoa's Alan Cransberg, used the occasion to press the federal treasurer on the consultation process for the proposed new tax.
It is understood Mr Swan did not concede any ground, repeating his view that consultation will be confined to transitional provisions.
One guest told WA Business News Mr Swan flatly refused to countenance any discussion around the use of the government bond yield (about 6 per cent) as the rate at which the new tax kicks in.
Other guests at the dinner included Gindalbie Metals' chief executive Garrett Dixon, Atlas Iron's David Flanagan, Mineral Resources' Peter Wade and Schaffer Corporation's John Schaffer.
Mr Swan was told the proposed tax had raised concern about the perception of WA by overseas investors.
He was also told that its retrospective application was a cause for concern, although apparently Mr Swan surprised the guests by arguing the tax was not retrospective.
Miners asked for it
Mr Swan defended the tax again at a Chamber of Commerce and Industry lunch on Monday, saying the tax was what the mining industry had asked for.
“The mining industry itself asked for it, in its submission to the independent tax review, they said ‘please update the royalties system, get rid of it and put in place a profits based tax,” the treasurer told an assembled media throng immediately before the lunch.
Chamber of Minerals and Energy WA director Reg Howard-Smith used the lunch to ask “what exactly is on the table for discussion.”
Mr Swan said he was committed to the general framework of a “40 per cent RSPT”.
He acknowledged there had been a spirited debate around the use of the government bond yield to determine when the new tax kicks in, but otherwise repeated his line that the government would consider “generous transitional provisions”.
$50,000 campaign
The WA Liberals took the opportunity of Mr Swan’s visit to launch its $50,000 advertising campaign against the new tax.
The campaign, which will include letter box drops and radio advertising, claims the tax threatens half a million Australian jobs.
WA Liberal Party director Ben Morton said the 40 per cent grab on mining profits could be stopped with a change of government.
The Libs’ campaign coincides with an advertising campaign launched last week to fight the proposed super tax by a consortium of 18 WA business community leaders.
The 18 business leaders, including mining magnates Gina Rinehart and Andrew Forrest, will use full-page newspaper advertising to express concern of the tax’s effect on the state's economy.
Other mining industry participants include BHP Billiton Iron Ore president Ian Ashby, Mr Walsh, and Mr Cransberg.
Campaigners outside the mining industry include Austal Group chairman John Rothwell, car dealer John Hughes, ABN Group managing director Dale Alcock and developer Nigel Satterley.
Henry kicks back
Meanwhile, Treasury Secretary Ken Henry has also responded to criticism of his RSPT during a post-budget briefing to the Australian Business Economists lunch in Sydney, highlighting benefits the tax will bring for small mining companies and the super profits large mining companies will continue to make.
Refuting a big amount of criticism from disgruntled mining executives, Mr Henry presented his own argument that smaller mining companies will benefit from the removal of the current royalties based regime.
He said a switch from royalties to rent-based charges or taxes applying to mining profits makes sense, as rent taxes are more responsive to the economic cycle.
"Projects which are right at the margin at the moment because of royalties will become profitable projects if royalties are removed and the RSPT is imposed.”
Larger mining companies like Rio Tinto and BHP Billiton have spoken out against the new resources tax, but Mr Henry contests their profits will continue to be “super normal.”
Mr Henry also projected that mining investment is set to increase over the long-term as a result of strong commodity prices and sustained demand from China.
“As you would know, China and, to a lesser extent India, have enjoyed a marked catch-up in per capita incomes to more developed countries. This catch-up has been a major source of growth in demand for Australia’s mineral exports. But both countries still have a long way to go,” he said.
