So, let's investigate the practical merits of the original mining tax, the RSPT, at 40% of net profit before tax. (It has commercial parallels when a going concern business is leased out to tenants on the basis of a 50:50 split of net profit before tax.)
KPMG-Econtech modelled Australian taxes and found the existing 40% petroleum resource rent tax had no welfare loss for each additional dollar of revenue raised, none at all; therefore, in attempting to "sell" the RSPT mining tax, the Rudd government failed to educate Australians that this would simply bring mining into line with the petroleum tax which has proved in application to have zero social cost.
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At the other end of the KPMG-Econtech modelling scale were royalties and crude oil excises: these show a welfare loss of 70 cents for each additional dollar collected, and are the mining taxes to which prime minister Abbott and treasurer Hockey are wedded once the MRRT, an admittedly poor tax itself, is removed.
Therefore, Labor having been scared out of tax reform by the mining lobby, and the lobby having captured the ear of the new Liberal government, where lies any hope of implementing any tax reform at all from the recommendations of the Henry Tax Review, arguably the most comprehensive analysis of taxation produced anywhere in the world?
Business did not support the mining tax for its efficiency, nor has it supported the other leg, reform of state land taxes. It interesting to note that municipal rates and land taxes, at a welfare cost of less than 10 cents in the dollar, are the next most efficient to the RSPT and petrol resource rent tax. These compare with conveyancing stamp duties at a social cost of about 35% and corporate and payroll taxes around 40%.
As it seems business has not been won over by the relative efficiency argument, one is entitled to inquire what it actually takes to get business up in arms against a tax regime that is slowly but surely strangling it?
Now that Labor is out of its way, if it refuses to acknowledge the obvious benefits of the tax reforms outlined in the Henry Tax Review, one is left to conclude that Australian business doesn't deserve to be saved, and that it's all downhill from here.
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