As you know, I am always keen to pick the brains of the Cat crowd. Some of you are so clever and knowledgable, while some of you are easily distracted 
(Thanks for the feedback on medical workforce training; I am planning on doing some more work on the issue.)
I understand that the first figures we will have on the MRRT revenue are due out on 23 October, so not many more sleeps. The tax is payable quarterly in arrears. Recall that the Budget had put down a figure of $3 billion in MRRT revenue for the fiscal year.
Here is my guess:
- Most of the revenue will come from iron ore, not much will come from coal.
- BHP and Rio will elect to pay a bit because they designed the tax and, for political economy reasons, it would be bad sport not to pay anything.
- But because of the Deferred Tax Assets being carried in their books were struck when the tax was announced in 2010 and when market prices were higher, these two companies could technically play nothing. There is scope to work the tax book in a way that will give various outcomes.
- Xstrata will probably pay nothing, in part because it doesn’t really give a toss and in part because it is busy merging with Glencore. Its Australian assets are also coal.
- An all-up annual figure of $1.5 billion would be a good outcome for the government.
Any other bids?
It might be a good outcome – not sure if it is realistic. I will have to have a chat with a few of the accountants over here in WA to see if the figures are lower than you have.
I might disagree with your second point – if they want the tax/government gone all they need to do is declare zero (or very close to it) payable. The small producers out there (FMG, Atlas and a couple of others) are not making enough to cover the difference.
Andrew Reynolds
15 Oct 12 at 5:39 pm
And anyone who is anyone in resources is moving their marketing offices to Singapore – ‘to be closer to their customers’. Noting that Singapore consumes neither coal nor iron ore, is hot and an expensive place to base expats.
Reportable mining entities will be ‘pty ltds’ in Australia; revenues will be netted off after hedging, spedging and corporate overheads from the Singapore marketing entities and
as you say Judith
big mining companies will probably only make ‘act of grace’ MMRT payments, while only small and medium-sized Australian based entities will wear it in the neck – further crushing new start challengers to the big incumbents out of the Australian market.
A brilliant policy negotiated by the big three to crush the wannbes; consolidate control in Australian mining; and all ably assisted by the geniuses in Treasury who could never see this coming.
Myrrdin Seren
15 Oct 12 at 5:47 pm
The MRRT resulted from the “re-negotiation” of Mr Rudd’s RSPT before the 2010 election. Ms Gillard attempted to “find” Labor’s lost way by controlling illegal boat arrivals with the East Timor fiasco, taking the heat out of global warming with the 150 people talkfest/love-in and heading off the anticipated advertising campaign by miners by doing a deal with the Big 3. BHP negotiated a reported 85% discount, which subsequently has been estimated to be higher. Rio and Xtrata extracted large discounts too. You will recall Mr Swan was ropeable and Mr Ferguson got involved. The Big 3 “shut up”, Ms Gillard never released the details promised and people queried the lack of guidance to the stock market.
The disastrous effect on forward estimates was apparent then (regardless of mineral price drops) and we wondered what new tax would replace the lost revenue. The Greens gave Ms Gillard and Mr Swan their “out” and carbon tax was back on the agenda.
The hypocrisy now indemic in this government was shown for all to see – the 2 reasons given for a resource tax by the PM and Treasurer were to share the mineral wealth with “all Australians” (even though they don’t own them, the states do) and to safeguard finite resources. By excluding copper, nickel, uranium, bauxite etc from the MRRT, can we assume that those resources are now infinite and/or need not be shared by “all Australians”.
The income from MRRT will be far less than budgeted and only a fraction of the expected $6-7 billion pa in 2010. One wonders if Labor willingly gave the Big 3 the mammoth discounts or whether they “screwed up” in their haste to shut them up. Deception or abysmal understanding by the “great negotiator”?
Of course the further complication was the increase in state levies offsetting federal income too.
With the Commonwealth Securities on Issue hitting $256 billion and interest upwards of $10 billion pa, one wonders whether Ms Gillard and Mr Swan understand economics, accounting or just plain commonsense.
Allan
15 Oct 12 at 6:43 pm
Judging by Labor’s success in stuffing up just about every other aspect of governing and being unable to successfully predict in which direction the sun will rise tomorrow my guess is that they will owe the mining companies.
grumpy
15 Oct 12 at 6:47 pm
There is a lot of potential for tax avoidance, as with any new tax. With this one in particular, the mines themselves can redirect expenditure before the taxing point (ROM stockpile), by classifying expenses as related to the pit or UG rather than the wash plant.
2dogs
15 Oct 12 at 7:02 pm
2 dogs you are right on the money.
Every mine that I’ve ever been involved in shuffles their costs around the budget board to suit whatever the Balance Sheet or P & L require in order to meet Mar Ket’s expectations.
amcoz
15 Oct 12 at 7:36 pm
I came across this at work (yes I work for a dreaded Bank
)
“Chinese coal imports subdued by banks’ L/C refusals
Chinese banks are refusing to issue letters of credit (L/Cs) for coal imports, as they put pressure on China’s traders.
The move is part of a general cut in bank lending to coal traders, while the tightening of credit terms is expected to keep coal prices depressed.
Loans recalled
According to local media, some Chinese traders have closed their coal businesses because their banks refuse to provide them with new L/Cs.
In some cases, Chinese banks are also recalling loans from traders.
Depressed prices
Lack of Chinese demand for coal has a negative impact on world prices and particularly affects suppliers in Australia and Indonesia, which provide much of China’s coal.
Coal prices have declined by around 20 per cent since the beginning of the year, and weak demand from China is likely to keep prices depressed at under US$90 per tonne.”
Maws
16 Oct 12 at 9:31 am
http://www.theaustralian.com.au/national-affairs/treasury/bhp-billiton-and-rio-tinto-opt-for-first-mine-tax-hit-as-mrrt-falls-short-of-5bn-forecast/story-fn59nsif-1226498166777
Pretty spot on predictions, Judith.
Well done.
tgs
18 Oct 12 at 8:11 am