17/06/2010 - 00:00

No tiring of mining tax debate

17/06/2010 - 00:00

Bookmark

Save articles for future reference.

Seven weeks on, the controversy over the resource super profits tax continues to run hot.

Can any readers guess who made the following statement?

“I think what we have to do is to get out there and talk about the importance of our reforms to economic prosperity.”

It was treasurer Wayne Swan, who this week continued his dogged refusal to acknowledge the weight of criticism of the resource super profits tax.

Instead, in a television interview, he insisted the government was doing a good job and the anti-tax campaign was down to a small minority making a lot of noise.

“I think we've got some vested interest out there that are absolutely determined to do anything to stop the reform of resource taxation which is absolutely vital,” Mr Swan said.

He added that “of course, their voices will be heard”.

That footnote remains a sore point for numerous businesses in the resources sector that are dismayed by the lack of genuine consultation on the tax proposal.

In fact, Mr Swan went a step further, stating that “many companies have [consulted] in a genuine way; other companies have not necessarily engaged in that way”.

The chief executives of many of the largest mining companies in Australia would beg to differ. Last week, they jointly signed a letter to prime minister Kevin Rudd expressing their dismay at the tax proposal and the lack of consultation.

Wesfarmers chairman Bob Every added to the criticism this week, saying the consultation process around the new tax had been “completely inadequate”.

He suggested that releasing the Henry Review’s findings and then having open consultation would have enabled the government and industry to reach “at least some platform of agreement on broad principles … from which we could have moved forward together”.

“Instead the federal government has established a review panel with extremely narrow terms of reference and meaningful debate has been replaced by increasingly divisive rhetoric.”

Mr Every spoke for many people in the business community when he said “the process should be restarted and the tax completely revamped”.

Mr Rudd made another contribution to the debate this week, rounding once again on Queensland magnate and National Party backer Clive Palmer, who claimed very early in the debate that he had cancelled two projects because of the tax proposal.

Mr Rudd said this week the government had found no evidence of those cancelled projects existing in the first place.

His comments do nothing to address the measured critique put forward by numerous other mining companies, including Wesfarmers which disclosed that its Queensland coal mining division paid an effective tax rate of 41 per cent, after adding company tax and state-based royalties.

Behind the bluster of public debate, all the smoke signals emanating from Canberra indicate that the government is working on a compromise proposal, most likely involving the adoption of a resource tax that resembles the existing petroleum resource rent tax.

The PRRT has a headline tax rate of 40 per cent, and Mr Swan has repeatedly stated that this aspect of the proposed mining tax is not negotiable.

The PRRT also exempted existing projects when it was introduced but there is little prospect of that happening for the mining sector.

Continuation of a 40 per cent rate, with a more generous tax base, would be seen by many as an acceptable compromise, but as Access Economics director Chris Richardson has pointed out, the petroleum and mining sectors are very different.

"In petroleum, the 40 per cent rate we've got is competing with some very high tax rates in the rest of the world, but in mining, hard rock mining, tax rates in the rest of the world are much lower.

"If 40 per cent is the right rate in oil and gas, then it's too high in hard rock mining because it's competing with very different tax rates in the rest of the world."

Let the campaigning continue.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options