THE ECONOMY: by Peter WestmoreNews Weekly
Latest bizarre twist in mining tax saga
, February 2, 2013
When Julia Gillard announced that her government was introducing a new mining tax on July 2, 2010, she described it as a “breakthrough agreement” with three of Australia’s largest mining companies that would “underpin major economic reforms that will strengthen our economy so we can move forward together with confidence”.
The mining tax, officially described as the minerals resource rent tax (MRRT), imposed a 30 per cent super tax on profits from iron ore and coal, as well as oil and natural gas, but was only imposed on companies’ mining profits above $75 million.
Additionally, there was a range of offsets, including accelerated depreciation and the write-off of exploration expenditures; losses from one project were transferable to more profitable ones.
After its introduction on July 1, 2012, the MRRT was expected to raise $9 billion in the first four years, and even more later.
In anticipation of this, federal Treasurer Wayne Swan announced at the time that the company tax rate would decrease to 29 per cent, and that the mining tax would bankroll increased pensions, an increase in contributions to Australians’ superannuation earnings, and “new and improved infrastructure”, particularly in the two main mining states, Western Australia and Queensland.
This money has already been spent.
However, the sudden collapse in commodity prices from about the time when the new tax was introduced meant that revenue from the new tax would decline substantially, leaving a black hole in the federal budget.
Just how much it would decline was a matter of conjecture. In its October budget update, the Treasurer said that expected revenue from the mining tax would be $2 billion this financial year.
It later emerged that the government had collected nothing in the first three months of the year, a suggestion which Mr Swan fobbed off, saying that the calculation was based on annual returns, not returns for each quarter.
He told ABC radio, “The design of a resource rent tax is such that it delivers the revenue when profits are high, and, in the case of commodities, when prices are high.
“And of course when they go down, well it doesn’t necessarily deliver the same amount of money. In the past few months, we’ve had a real crash in commodity prices” (ABC, October 25, 2012).
As commodity prices until December remained subdued, there was no reason to believe that there would be any mining tax paid in the first half of the current year.
Shadow Treasurer Joe Hockey demanded that the government release the income from the mining tax, and accused the government of hiding the failure of the tax.
He said, “Julia Gillard personally negotiated the design of the new tax with Wayne Swan and the mining industry, and now we have a revelation that it’s not raising a cent.
“Only Labor could introduce a new tax that doesn’t raise a single cent, but has billions of dollars of expenditure against it.
“What’s worse is, the Government knew this was coming and brought forward [its] budget announcement to avoid revealing the true state of the mining tax.”
After two quarters without any mining tax income, one observer described it as a “Clayton’s mining tax”, saying, “The Federal government looks likely to walk away empty-handed — apart from more egg on its face, after the nation’s top resources companies confirmed they will not make any mining tax payments for the second consecutive quarter.”
The federal opposition again called on Mr Swan to reveal what moneys had been received from the mining tax — but received no reply.
While Mr Swan was addressing the Asian Financial Forum in Hong Kong, the Minister for Finance, Penny Wong, was interviewed on ABC radio on January 15 by Linda Mottram.
A transcript of the interview is on the minister’s website. Ms Mottram quizzed the Finance Minister on what revenues were expected from the mining tax.
Again, Ms Wong was evasive, but came up with the novel excuse that “We are constrained in terms of what we can provide on the MRRT [minerals resource rent tax] by what the privacy provisions within the Tax Act say and what the ATO [Australian Taxation Office] says in terms of preserving the confidentiality of taxpayers.”
The same day, the federal government leaked a Treasury minute which made the bizarre claim that disclosing the tax information could lead to two years’ jail.
The Treasury minute said, “The ATO’s current view is that disclosure of these data would breach the secrecy provisions of the Taxation Administration Act, as taxpayer information may be ascertained by the process of deduction. Accordingly, these data have not been published in the monthly financial statements in October 2012.”
In other words, the Treasury was saying it would not provide the government with information on how much tax it had collected (if any)!
The former Treasurer, Peter Costello, dismissed the Treasury minute, saying, “The confidentiality provisions are there to protect individual taxpayers, but it has never been used to prevent the release of aggregate tax collections.”
It is clear that this government will stop at nothing to hide its own economic failures.