The late Robert Holmes a Court loved what he called “black letter law” - written so tightly by governments that they thought no-one could find a loophole, but which to him was merely a mental puzzle - the sort solved by BHP Billiton as it revved up a 320-tonne Komatsu ore-truck and drove it through the minerals resource rent tax.
The late Robert Holmes a Court loved what he called “black letter law” - written so tightly by governments that they thought no-one could find a loophole, but which to him was merely a mental puzzle - the sort solved by BHP Billiton as it revved up a 320-tonne Komatsu ore-truck and drove it through the minerals resource rent tax.
The fact that BHP and other big miners are paying virtually no MRRT would not have been a surprise to Hacca, and probably to no-one else in the private sector who followed the ludicrous design and re-design process of the federal government’s attempts create a mining super tax.
“Governments love black letter law,” Hacca said on several occasions. “To me, that simply means they’ve provided a road map to find a way around the law”
The irony of what’s just happened with the MRRT, the discovery by Treasury officials that it has provided a road map, with GPS coordinates, for anyone wanting to minimise tax payments (which is the duty of every taxpayer) is that the chief beneficiary is BHP Billiton, a company once a Hacca takeover target.
BHP Billiton, it seems, did learn a trick or two from the master share raider.
The same cannot be said for Treasury officials, or their ultimate master, the Treasurer, Wayne Swan, who seem to be the only people to have been shocked by the discovery that MRRT takings for its first six months tallied a lowly $126 million, about $1 billion short of the target, with no hope of reaching the promised $2 billion in year one.
Precisely what happened in the tax design process is anyone’s guess, though it is interesting to look back at some of the conspiracy theories floated by Fortescue Metals boss, Andrew Forrest who was convinced that BHP, Rio Tinto and Xstrata had manipulated the MRRT to their benefit.
In hindsight, Forrest was 100 per cent correct, though it wasn’t so much a conspiracy as good business.
What the big three miners did was ensure that they were allowed two critical loopholes – the ability to claim as a tax deduction royalty payments to the States, and the ability to use the current value of their mines for depreciation purposes rather than the historic value, as first proposed.
The net result is a tax which probably costs as much to administer as it collects and which appears to be been concocted while everyone involved had their eye on Kevin Rudd’s back in preparation for launching Julia Gillard’s run for the job of Prime Minister.
Dark humour aside there are a number of victims in what’s happened with the failure of the MRRT to be the cash cow promised by Swan and Gillard who boasted that their tax was so much better than Rudd’s version of a super-tax on mining, the now largely forgotten Resources Super Profits Tax (RSPT).
The list of victims includes:
- Treasury officials who believe in computer driven models but now understand the meaning of GIGO – garbage in, garbage out, and who failed to understand the level of depreciation available to big miners, and even misunderstood that some mines have shorter lives than other.
- Wayne Swan who had staked much of his reputation on the MRRT, and the competence of his Treasury officials, despite many of them having never visited a mine, let along gone down one.
- The Australian Government which, despite denials, is now looking at a massive hole in its budget having pre-spent the revenue from the MRRT on vote-buying social welfare handouts only to discover that the revenue it imagined would arrive is now not coming.
Big miners and State Governments should not crow too loudly about this latest example of a “dog’s breakfast designed in Canberra” because it is certain that reprisals are planned by the people made to look foolish.
A direct attack on the States with high mineral royalty income, and that means WA and Queensland, will be top of the payback list, as is a possible attempt to broaden the tax by including other minerals as originally proposed in Rudd’s RSPT.
The only question for the Australian Government as it shifts into financial damage control ahead of the May budget is whether it strikes now, before the September 14 election, or leaves it until after when it hopes to still be in office.
Like the RSPT and MRRT the timing is a political question, and perhaps that’s what was wrong with the super-tax from the start, it was a political exercise and not a genuine attempt to broaden the tax base.
