I have an op-ed in The Australian this morning:
The MRRT experience has been so bad that there is now some nostalgia for the ill-fated resource super profit tax. Unlike the MRRT, we’re told, this tax had teeth and would have raised substantial revenue.
Yet this revisionist view of history invites us to believe that Treasury could accurately forecast revenue for a complex RSPT when it struggles with company tax and was disastrous on the MRRT.
The problem is the government has been too eager to accept the results of complex modelling at face value and then impose poor policy. The RSPT was a particularly complicated tax that failed the common sense test.
Documents released under Freedom of Information in early 2011 reveal that Treasury didn’t understand that miners would have to finance the government’s share of investment at their own cost of capital while the government only paid the risk-free rate. And Treasury seemed to think financial markets would value the 40 per cent rebate the RSPT promised. They didn’t.
The bottom line is that elegant theoretical proposals don’t always translate into sensible practical policy. The taxing of imagined mining rents is one such proposal.
Update: Capitalist Piggy asks why I describe mining rents as ‘imagined’ – here is a previous post where I discuss the notion of rent.