Posted by John, July 4th, 2010 - under Julia Gillard, Resource Super Profits tax.



The big mining bosses have won. Gillard has dumped the Rudd Resource Super Profits Tax faster than oil began spewing into the Gulf of Mexico.

To give the impression of compromise she and her mining masters – BHP, Rio Tinto and Xstrata – have adopted a Minerals Resource Rent Tax (MRRT).

One capital markets analyst has called this a win for the big miners. How so? Let me count the ways.

Only iron ore and coal will be covered. Resources like copper, uranium, nickel, bauxite and gold are no longer included. BHP’s Olympic Dam anyone?

But hang on. Wasn’t the whole point about the mining tax that the resources belong to us and mining companies are getting a free ride? Yes. So they will continue to get that free ride if the minerals are not iron ore or coal.

The number of companies subject to the tax will plummet from 2500 to 320.

The headline rate has been cut from 40 percent to 30 percent. But like all things about this ‘compromise’ the new headline rate is misleading. A 25 percent extraction allowance means the real rate of the tax is 22.5 percent.

The uplift rate has been increased from the long term bond rate of almost 6 percent by 7 percent added on top to 13 percent.

The trade of is that the Government will no longer fund to 40 percent the risk of projects failing. This will adversely impact on small iron and coal explorers especially but have no effect on BHP, Rio Tinto and the like.

The government has effectively abandoned applying the tax to existing projects. They have used a market value/book value sleight of hand to do this. The end result is that the big mining companies will have an artificially inflated cost base to wipe out much of the ‘super’ profits on existing projects.

And after 1 July 2012 capital expenditure on projects covered by the MRRT will be recoupable.

The Government estimates there will only be a slight fall in revenue collected – $10.5 billion compared to $12 billion. This looks like a pile of steaming hot dung to me, based on the concessions given.

But given the tax doesn’t kick in till 2012, who will know or care in two years time how much the tax raises?

The tax cuts for business and the infrastructure spending will be paid out of our toil and public goods, not out of profits and that will set the pattern for future company tax cuts and other benefits to business.

The Government claims that both the RSPT and MRRT are going to be used to pay for superannuation. More rubbish.

First the amount being spent on topping up low paid workers is about 3 percent overall of the estimated tax collected. Most of the revenue will go in tax cuts for all business, accelerated depreciation for small business and infrastructure spending for the big miners – ports, roads and train lines.

Second, the idea that the business tax cut (now held at 29 percent rather than 28 percent) will fund the superannuation guarantee charge increase from 9 to 12 percent over six years is wrong.

Those increases will come out of wages. Unions will negotiate wage cuts equivalent to the scheduled gradual increases.

Historically Labor’s role – apart from disorienting the working class movement with attacks on it – has been to makes reforms for the benefit of capital generally, sometimes at the expense of sectional interests. The backdown on the RSPT means that that role for Labor is now dead and it too is a captive of, or will pander to, special business interests.

Part of the scare campaign the mining magnates ran against the RSPT was the likely increase in unemployment. Nowhere in the announcement from Gillard has there been any indication that the Labor Government negotiated, let alone sought, any agreement from the miners about employment levels.

There is nothing at all from Labor on securing jobs in exchange for the sellout on tax. So the mining bosses who sacked 15 percent of their workforce during the Global Financial Crisis are free to do the same in the future.

What a disgrace from Labor. This back down on taxing the big mining companies shows just where the ALP’s priorities are when it comes to capital and labour.

This is a Government moving rapidly to the right and hoping that jump will win it re-election.