The resource super-profits tax is buried, the minerals resource rent tax is terminally sick.
Treasury's estimate that the MRRT would reduce the RSPT's estimated $12 billion tax collections by only $1.5 billion was never credible.
Analysts assessing the costs of the government's attempted plunder of the mining industry are now revealing a more accurate picture. According to Citibank, the RSPT would have devalued the main businesses' worth by 13 per cent to 25 per cent; Citibank puts the cost of the MRRT on BHP, Rio and Fortescue at 1 per cent to 3 per cent of value. Deutsche Bank sees the MRRT's adverse effect on two of the three main listed coalminers at less than 1 per cent of value.
The RSPT was founded on seizing present assets of businesses and adding heavy penalties to future mining investment. It was glibly assumed these measures would have no influence on the affected sector's decisions.
How could such naïve policy have been developed? Who was responsible and how do we prevent a repetition? The government has offered Kevin Rudd as the fall guy. And he was doubtless a big player in the debacle.
The RSPT was devised by Treasury secretary Ken Henry and is the only recommendation of his taxation review picked up by Wayne Swan. The Treasurer saw the tax as a way to bridge the fiscal haemorrhage created by the government's spending spree in response to the global financial crisis.
Finance Minister Lindsay Tanner was part of the quartet that ticked off on the proposal, as of course was Julia Gillard.
An early endorser was Resources Minister Martin Ferguson, who called it a major reform. Such is political life. Another was Small Business Minister Craig Emerson, who said, "We are going to implement a resources tax, a resource super-profits tax, because we want to use the proceeds, again, to invest in the future."
And Climate Change Minister Penny Wong proved her gullibility is not restricted to buying the underestimated regulatory cost of measures to reduce carbon emissions when she maintained the RSPT "would strengthen the Australian economy, increase productivity and increase mining output".
Although the MRRT raises little from big existing mines and Treasury's revenue forecasts of the two mining taxes are grossly inconsistent, the MRRT is still scheduled to raise future revenues. Eventually, however, the government will realise it will actually have a negative revenue effect. This is because the Treasury forecasts are predicated on the tax bringing no adverse future investment consequences.
According to Goldman Sachs, the combined effect of the MRRT plus profits tax on a future coal mine will be 45 per cent, which is down from 57 per cent under the RSPT but up from 37 per cent at present. Among big competitors the equivalent tax rate in India is 41 per cent, South Africa 35 per cent and Russia 24 per cent. For iron ore, the MRRT plus profits tax combined is also 45 per cent, up from the existing 35 per cent and somewhat above the 36 per cent equivalent in Brazil.
Miners will use these or similar numbers to assess the merits of different investment locations. As Rio's Tom Albanese has said in the context of the MRRT: "But of course our Australian projects will always have to compete for capital with our other investment opportunities across the globe."
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