MRRT WTF

From today’s AFR:

The Gillard government’s revised mining tax will collect $60 billion less over 10 years that the resrouce super profits tax, raising questions about whether it can fund higher superannuation tax concessions and infrastructure spending.

New figures released under the freedom of information (FOI) laws reveal that the mineral resource rent tax will collect more tax in its first year than the original resource super profits tax. But from then on, revenue losses from the new tax start to climb, the Treasury documents reveal.

In 2017-18, the MRRT is forecast to collect just $3 billion, compared with the $14.5 billion that would have been collected by the RSPT.

The shortfall is forecast to total $60.5 billion in the decade after the tax begins in 2012-13.

Now, one proviso. We know Treasury is bullish on China so these projections are no doubt based on the endless urbanisation premiss.

That said, anyone wishing to go through year by year, for a full dose of volcanic rage, find the Treasury documents below. A few quick calculations to get the anger simmering:

– the miners invested $27 million in ads for a return of $60 billion over ten years. That’s 2222% before interest

– the Gillard government gave up $6o billion over ten years (before interest) to retain government

– the MRRT deal increased first year takings and lowered all years after that. Given only two years of projections were released prior to the election, that reeks of politics trumping the national interest in negotiations

– At 7% return, we’ve forsaken a $94 billion sovereign wealth fund in 2020/21

And from the SMH:

Global mining giant BHP Billiton has posted a record half-year profit of $10.52 billion, upped the dividend it will pay shareholders and plans to return $10 billion in cash to its many shareholders.

For the six months to the end of December, the company posted revenue of $US34.166 billion ($34.01 billion) this morning, up 39 per cent on the same period the year for 2009.

Much of the rise was attributed to soaring iron ore, copper and oil prices, mainstays of the world’s biggest miner’s business.

Failing to conceive, debate and negotiate a fair dinkum resource rent tax was an historic blunder.

MRRT_Model

Comments

  1. First thing I was taught in economics at uni – “Economics is about the management of scarcity”. Two decades after the “recessiona Australia had to have”Australia seems to have developed the opposite viewpoint. Is it any wonder we’ve had nearly a decade of weak government sporting lazy policy?

  2. Sad to see how easily and cheaply a bit of advertising could get the Australian public to part with $60 billion. I would also point out that a Coalition government would have scrapped the whole thing and collected nothing.

  3. FrankieFourFingers

    Still annoyed at the ignorance of australian voters. We deserve everything we get including inept leaders in a split parliament.

  4. Sheesh, what’s with all these calculations? Don’t you know the electorate only want to hear snappy slogans like “Great Big New Tax!”.

    “What’s going to happen when we’ve sold all the rocks and the rest of our industries are buggered?” isn’t as catchy

  5. If Gillard is wondering about her lack of popularity then look no further than her famous folding act after she got the reins. Its really unfortunate that we lucked out on that extra money because of a fundamental lack of spine from Labor because it clearly demonstrates they can’t stand up to big business when its in the interests of the majority.

    • It was more the fact that the ‘then’ Rudd government ‘claimed’ to have consulted the mining industry before introducing the tax. They did no such thing, hence why the mining companies went for the jugular. If they talked to the key companies first, before ramming it down their throats, we would now have some sort of ‘mining rent tax’.

      Like the now defunct ‘Rudd’ health reforms, that government had the poor habit of announcing a ‘reform’ then trieing to sell it to the relevant parties. Instead of talking to key bodies (who may object) and then announcing a policy with them on board. If Rudd talked to WA first, instead of trieing to take 33% GST revenue by stealth, Julia may not have need to backflip on these reforms last week.

      The whole ‘carbon tax’ or Emissions trading debacle is another area in which Labor haved changed their position too many times to appear a leader.

      1. Greatest Moral Challenge of our times. KR.
      2. We will do it in the next term. KR – Before axing.
      3. No carbon tax. JG – Prior election.
      4. Actually we need a carbon tax/price. JG

      Just pick a position, be a leader and live or die by it. Vision. That is my Theory on why Gillard is in trouble.

      The other thing is Labor trumpeted Ken Henry’s tax reforms for a year before he completed his paper. Sat on the paper for six months and didn’t address any of the items raised except poorly introduce a ‘Mining Rent Tax’. Without abolishing or amending any other taxes.

      Sigh.

      p.s. I disclose I have some connection to the Mining Industry.

  6. We currently have quite possibly the most incompetent and wasteful govt in Australian history. Why are people complaining that the Govt missed out on wasting even more money?

    The way I see, thanks to the campaigning of the mining industry, we dodged a bullet!

  7. All governments in this country – local, state and federal – are manipulated by lobby groups that use well-crafted media campaigns. The anti-RSPT campaign was simply one of many.

    If this gets anybody’s goat at this late stage, I can only assume that either (a) they haven’t been paying attention to what’s happened to this country in the past decade, or (b) they have – perhaps admirably – not yet slipped into terminal, cynical ennui.

    Then again, our political parties can’t do any better than simplistic slogans, and the media unquestioningly publish even the most egregious PR (because it’s cheap, you see), so we get this crap from all sides.

    So I say: give it time. You’ll stop caring soon enough.

  8. 60 Billion!! It’s the most profitable 22 million the mining company has even spent!!

    Part of the fault lies with the population in QLD and WA, They simply didn’t like to see the taxes from mining going elsewhere. The rebate design of the tax is also too radical : it should have started with something like the Petroleum Resource Tax and work from there. Either way, the tax will be revised when the Government runs out of money.

  9. …$60 billion less over 10 years, raising questions about whether it can fund higher superannuation tax concessions.

    If this is referring in any way to the rise of SGC to 12% then the main stream media ought to get on to the fact that this increase will be funded by business, not the taxpayer. Businesses will have to find the additional three percent from somewhere…presumably via a squeeze on margins and therefore profits.

    Remember SGC is good for the future but is still a tax on business.

  10. And to think, all Rudd needed to do was wait until after the election. Given the 6-month memory of the electorate, coming out with this 6-months before an election was never going to work.

    • FrankieFourFingers

      Rudd had a free ticket to make some tough decisions in the best interest of the nation, and put the blame for the need to do so on the Howard govt. Rudd instead opted for selfish populism.

      It is somewhat ironic that Rudd’s populist policies made him unpopular, and that his only tough decision ended up being his downfall.

  11. I totally agree this is a blunder of historic proportions. It’s a real pity Australia was unable to have an adult conversation about taxing resource rents sensibly and providing for the future via some kind of sovereign wealth fund.

  12. “New figures released under the freedom of information (FOI) laws reveal that the mineral resource rent tax will collect more tax in its first year than the original resource super profits tax.”

    Maybe our government knows that mining boom will end much sooner so they will collect more tax in first two years than in 10 with the “resource super profits tax” because there will be no profit once china slows down or builds its own capacity.