The mining super-profits tax debate - an analysis

This kind of “framing” of the debate - with very selective quotations, and sometimes a virtual “media blackout” of themes inconsistent with the “campaign” - is both biased and deliberate, and is a genuine threat to Australian democracy in the meaningful sense of the word.

Much attention has been paid to the “hypocrisy” of the Labor government in devoting public funds to an advertising campaign of its own, but while Rudd Labor seems to be contradicting its past policy here, there are subtleties that are lost in this debate. In fact civic organisations need to be empowered against the potential clout of big business - not just in these circumstances, but also more broadly.

In fact a fair compromise would be to devote sufficient public funds for information campaigns and advertising to be made available for political tendencies across the political spectrum. One way or another we need to make sure the resources of political parties, NGOs, social movements and such, are sufficiently able to get their message across clearly, and are not disadvantaged - or even eclipsed - by the level of resources available to the most powerful and wealthy interests.

Theoretically, government also has other options at its disposal. If a “capital strike” was to take place government could “step into the breach”. Abandoned mines could be commandeered, with fair compensation being paid to those who formerly held title.

And a public mining company could be established directly, with the effect of profits flowing directly to the community, literally providing many billions which could be invested in infrastructure and social services.

Perhaps the current political climate, influenced by the long-held neo-liberal consensus, works against such options. But when billions are being ripped out of the country with “super-profits” every year, it is in the national interest for government to invest directly in mining.

Importantly, there are precedents which point to the workability of some form of mining super-profits tax. A “Resource Rent Tax” has operated successfully in the oil and gas industries for more than 20 years without any “collapse” of investment. Although as Tim Colebatch explains, while this tax is also applied at a rate of 40 per cent, it factors in only “above a benchmark [regarding profit levels] set 5 percentage points higher than Kevin Rudd and Swan now propose”.

Progressive blogger, John Passant has quoted John Kehoe of the Australian Financial Review to the effect that the existing mining tax proposal would only “kick in” at 12 per cent and higher. This means the regime proposed by Colebatch would see higher taxes on “super-profits” of 17 per cent and above.

As observed earlier in this article, there are many big mining operations which enjoy profits way above this threshold.

While the existing proposal from Labor is fair - and genuinely does focus on “super-profits” (far above average business profits), it’s important also for the government to think strategically about the current struggle.

Under favourable conditions, it’s important to set new standards; especially where existing arrangements are unfair. Some commentators (for example, John Passant) have written that it’s actually the prospect of a new precedent that frightens the mining bosses most.

But the power of existing precedents certainly should not be understated.