So, the mining executives of BHP, Xstrata and Rio who negotiated the mining tax did not even give the government a face-saving drachma of revenue in their first quarterly payment.
From those firms’ perspectives the negotiation of a settlement of the issue that triggered the downfall of Rudd and accession of Gillard was one of using the ample offsets from earlier investments to minimise the tax they would need to pay. Businesses always have an advantage over the tax office in estimating their future liabilities and so it has been shown.
Originally set to raise $4 billion a year and pared down to $2 billion, the failure of the companies to lodge any tax liability in the first quarter probably means nothing will be raised this year.
But the Schadenfreude from seeing the government once again to be demonstrated to be utterly incompetent should not blind us to the damage the tax does. It places a new impost on new mining activity as well as retrospectively imposing a tax surcharge on existing mines. And while many long-established miners can avoid paying it on existing facilities, the impost on new developments remains.
Although it is a tax that will collect far less than the looters envisaged it will reduce the incentive for new mines by making Australia’s mining fiscal regime among the most onerous in the world and setting mining apart for discriminatory taxation compared with other activities.
China and other fast growing economies have vastly boosted demand for raw materials and Australian mining firms have shown themselves to be expert at supplying that demand cost-effectively. The Government and its advisers have taken the view that mining is a huge pit from which revenue can be extracted at no cost to future activities. Big mistake.
We have a real advantage over many countries in the world because of our political stability etc. but exactions like the mining tax mean that we trade-off government revenue for greater levels of economic activity.
As we have seen with the one-off business tax hit from the monthly tax returns announced in MYEFO, the government’s priority is more revenue, with prosperity way down the list.
It seems that its taxation surcharge on mining will not only sacrifice economic activity but it will also fail to raise much additional revenue.
Another dullard gubberment fiasco.
Anyone sensing a pattern here?
Rabz
25 Oct 12 at 8:17 am
Another important issue that will not be addressed by a government using spin and social division to ensure no critical analysis is done.
Token
25 Oct 12 at 8:23 am
So it’s now the Government’s fault that commodity prices have collapsed. What next? Blame the Government for the Lance Armstrong fiasco? For the fact that Tony Abbott is a blundering fool, so much so that even Andrew Bolt this morning has turned against him? It’s obviously the Government’s fault that it hasn’t yet closed down 2GB and silenced that idiot Jones, or that Gina Rinehart is causing mayhem at an otherwise orderly AGM for Fairfax?
What more can you right-wingers blame Julia Gillard for?
Gareth Hamilton
25 Oct 12 at 8:25 am
What more can we blame her for? Dunno Les there’s lots of shit I’m sure.
JC
25 Oct 12 at 8:27 am
No gareth gareth, but it is the fucking morons’ fault that they pinned everything on the commodity prices goose continuing to lay a steady stream of golden eggs.
Speaking of geese, the now legendary goose ‘surplus’ (yeti, loch ness monster, anyone?) is dead in the water.
Nice try idiots.
Best go back to what you do best, that is, squandering billions of dollars we don’t have.
Rabz
25 Oct 12 at 8:30 am
Blind Freddie could tell you that commodity prices were unsustainable. It’s not that they didn’t know, but that they chose to ignore it in order to maintain the tax grab from both the miners and the states.
Of course it’s Gillard’s fault (but also Rudd’s). As of all the things she is accused of, being stupid isn’t one of them.
Besides, the dodgy deal by the multinational miners to reduce their tax has an obvious effect.
The Beer Whisperer
25 Oct 12 at 8:32 am
Nice strawman, but it does underline the fact that people like Hammy will always be taken to the cleaners when investing then moan about being poor.
There is a lesson here for anyone with at least 2 brain cells to rub together about the consequences of ramping up spending in anticipation of income in the future.
Token
25 Oct 12 at 8:35 am
Not long after the renogiation of the mining tax (RSPT to MRRT) where it was reported the Big 3 got up to an 85% discount (did Labor know and gave the discount or did they miscalculate?), BHP would pay an extra 2% tax rate or about $500 million, never the billions expected. Subsequent estimates indicated even this was high and recent commodity price falls confirm the non-payment.
Question 1 – why did the government pre-commit spending based on the income from the mining tax?
Question 2 – it was mooted BHP and Rio might make a token payment to keep onside with the guvment. Did the move to monthly tax payments kill this off?
Question 3 – when will the PM release the details of the MRRT agreement with the Big 3 which was due 3 months after the election?
Question 4 – falling commodity prices were flagged well before the May Budget. Were the Treasurer and his department stupid or dishonest in their forecasting?
Question 5 – if the Treasurer and his department are so inaccurate in short term budgetting (4 months now, not even 1 year), how can we possibly conceive long term projections of the effects of carbon (dioxide) taxing / trading?
Question 6 – when will the MSM, including the Canberra Press gallery and the ABC, climb into this government? The government is supposed to run the country, not ruin the country.
Allan
25 Oct 12 at 8:46 am
I guess if I sat down and negotiated with the government the amount of tax I would pay the figure would be zero too.
Wayne Goosestein. World’s Greatest Treasurer.
H B Bear
25 Oct 12 at 8:51 am
“No gareth gareth, but it is the fucking morons’ fault that they pinned everything on the commodity prices goose continuing to lay a steady stream of golden eggs.”
Post-revolutionary France printed money using as collateral European cities that Napoleon had yet to conquer. Then came Waterloo.
That pretty much sums up the state of things here right now.
The Beer Whisperer
25 Oct 12 at 9:08 am
I would have said like the Nazis MEFO Bills, looting Czech gold, but Homer Paxton might assault us all with his relentless stupidity.
.
25 Oct 12 at 9:54 am
Yes, it is a fiasco that you lot said the MRRT would cruel investment in Australian mining, isn’t it? Turns out it has had no effect on investment whatsoever. Commodity prices are the only important determinant. An embarrassing fiasco for the right.
m0nty
25 Oct 12 at 10:10 am
Leftists will point to zero dollar tax take under mining tax as proof of Tony Abbott’s scare campaign that international investors should worry about Australian sovereign risk.
ar
25 Oct 12 at 10:10 am
And right on cue is Munted…
ar
25 Oct 12 at 10:10 am
Yes, it did. It shut down the BMA coal mine almost immediately and made Wandoan look very dicey. Shut up minty.
Ergo, we don’t have comparative advantage, resource endowments are not comparative advantage. Australia has few comparative advantages to low cost labour countries with an abundance of mineral deposits.
.
25 Oct 12 at 10:20 am
m0nty,
The revenues from this tax, like the mining industry itself, will be highly cyclical. It is inevitable.
This means that when times are good the mining companies will earn less profit then they otherwise would. When times are bad or even moderate there is not going to be any revenue.
The formulas used to calculate it are absurdly complex, but that is, in very simple terms, the major effect. The other (but still important) effect is that as a result of the complexity it is very difficult for anyone seeking to invest in Australian mining to calculate what their actual after-tax cashflows will be.
Contrast that with investing in similar countries that are also resource rich (for example Canada). The legal systems are just as good, the people are also well-educated. Infrastructure is also excellent. The differences are simple – they get to keep more of the profits, while wearing the same losses. Additionally you can much more easily predict the cash flows, so finding finance is easier.
The two differences above now apply where ever you go on the planet to explore or mine. If I were an investor looking at Australia, even if this tax raises little or no revenue in the next year or so (as I expect it will not), I would still be looking for other places to invest and, if investing in Australia, I would demand a better project then I would if looking at a similar one in another country.
This tax will not stop investment in Australia. It will just make it less certain, more volatile and reduce income to Australian workers as they generally do not move overseas. The richer investors will not be significantly affected as they are able to invest overseas when looking for new investments. It looks like it will also raise little revenue.
I hope you are able to take this on and actually understand it. Given the track record of people who do not understand mining investment I am not confident.
Andrew Reynolds
25 Oct 12 at 11:21 am
Alan, you have neglected the role of the policy development phase of the MRRT in damaging the Federation. The Commonwealth storming into this area where they have no constitutional role effectively kills any chance of cooperation between States and the Commonwealth. The process was conducted in such a ham(mygar) fisted way and all pretentions to establishing a more efficient resource taxation system have been abandoned. Now miners and other investors are wondering if we really are that politically stable. Investors have and will continue to pay a premium for our political stability, but that premium is being vastly reduced by these incompetant clams.
Who would like to bet that we see George Megalomaniac on Insiders this week proclaiming how the tax is not onerous at all and has zero impact on the mining sector or the economy more broadly? The real uncertainty is just who will be scheduled to nod in agreement with him – Lenore Taylor? David Marr? Laura Tingle? Or perhaps the A-team of Australian journalism – Fabulous Phil Coorey and Malcolm ‘slim’ Farr?
Skuter
25 Oct 12 at 12:14 pm
mOron, go back to the doughnuts. Have some cream with them.
Tiny Dancer
25 Oct 12 at 12:21 pm
Skuter
well said. It was also a bit disappointing that Joe Hockey (at least in the interview I heard) only emphasised the lack of revenue as the issue and not the fact that its effect is to reduce the competitiveneness of Australia as a mining location.
Alan Moran
25 Oct 12 at 12:32 pm
M0nty once again gives us a clue…
…sure it is regressive, create the perception of sovereign risk and creates great fissures in the Federation of Australia…
…but stop worrying your pretty head about it as the incompetent nuff-nuffs who negotiated the agreement with the big miners screwed up so bad its not bringing in any revenue, so it is all ok now.
Token
25 Oct 12 at 12:41 pm
Others have already taken this apart, but for the slow (but large) headed – the tax comes from trailing profits. The effect on future investment cannot be ascertained from tax receipts on quarters gone by. I would have thought a functioning adult could have worked this out.
You’re basically trying to say that starting contraceptives have no effect because an already born child is still alive.
brc
25 Oct 12 at 12:52 pm
If WA has already successfully voted for secession, who says they won’t do it again?
.
25 Oct 12 at 1:40 pm
Indeed dot. These fools don’t know just how big a can of worms they’ve opened…
Skuter
25 Oct 12 at 2:21 pm
Let’s not forget the w@nkers at Treasury, and Ken.
Econocrat
25 Oct 12 at 2:37 pm