Monday, May 17, 2010

Resource Super Profits Tax

If there were ever a single graph that showed that miners should pay more in tax, this is the one.

The graph is from the Henry tax review and is reproduced in a May 4 pre-Budget speech by Wayne Swan "Managing Prosperity In The Next Mining Boom - Beyond the 'Lucky Country'"

What it shows is that as profits have increased, Australians share of those profits have declined.
In other words, the existing royalty regime has left the Australian owners of these non-renewable resources relatively worse off over time as the profits of our majority foreign-owned mining sector have boomed.
Now this shouldn't be seen as an excuse to bash foreign investors. I don't think it matters who is earning the profits as long as a fair share is distributed to Australians via the tax system.
Mining operations require more capital than can be provided by Australian investors, so foreign investment is essential, but the government's new tax will not restrict investment once it has been bedded down.
No doubt the mining industry does not want to pay more taxes, but its self interested attempt to maintain its large profits should be taken for what it is, self-interest. The amount of disinformation put out by the mining sector is a disgrace. Spokespeople fail to acknowledge that existing royalties will be refunded and that the govt will provide support while projects are getting to the point where they will make a profit.
Today's debate on  ABC Radio's World Today "Players sift through hype and hyperbole" is worth a listen.
While the form of the proposed tax should be debated, the final outcome that miners should pay more tax on their profits should be set in stone.

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