From the AFR:
The major mining companies will be limited on refunds they can claim for state royalties under a plan for the federal government to impose new restrictions to shore up revenue from the controversial mining tax.
The GST review, which looked at the way the tax is distributed among the states, was also asked to examine state resources royalties and is understood to have recommended putting a limit on the credits available under the minerals resource rent tax. Any overhaul of the mining tax could spark a fresh war with the miners, who argue any change would overturn the 2010 agreement that ended a multimillion- dollar campaign against its predecessor – the resource super profits tax.
The proposed change would mean that if states increase royalties, only a set amount would be refundable to miners such as BHP Billiton, Rio Tinto and Xstrata, which are expected to contribute about 90 per cent of what the mining tax is forecast to raise.
…Treasurer Wayne Swan is due to meet state counterparts in early December in a first bid to deal with increases in state royalties. If unsuccessful, Mr Swan will consider action against the states, including either withholding grants or federal legislation that deals with royalty credits.
“The government has asked the GST distribution review to examine incentives for states to hike royalties,” a spokesman for Mr Swan said. “The government is considering the final report and its recommendations before releasing it publicly.”
So! Could it be awwwn? The states are all Liberal and have no political incentive to buckle, as well as every economic incentive to hold the line as their budgets remain under pressure on all fronts. The Government is most likely going to miss its budget forecasts for a May surplus. I’ve speculated that they’ll call an early election to dodge this and on their rising fortunes as interest rates fall, but they can’t do that and go after the miners. They need the MRRT dough but it wouldn’t be in the can before May anyway. And the RBA does not look like it will co-operate with a slash burn campaign on interest rates.
Having said that, the flat out lie that the tax’s details need to be kept secret owing to their commercial sensitivity, which has us all trading in an uninformed market, may be working against the miners now. So long as the details of the tax are unknown, the government can do whatever it likes vis-a-vis the states and the miners can do a lot of hand-waving but less damage.
The Government could choose to delay the election and blame the miners for missing its surplus, as well as trash the MRRT by cancelling the royalty rebates. It would be an extraordinary gambit, especially since it will push out the election until late next year when the mining boom will be history, the economy sagging and ratings agencies circling for the kill.
How would the public respond? Mining fight round one went comprehensively to the miners. They made themselves community darlings and economic saviors, sufficiently so that taxing their boom seemed a bad enough idea to enough people that it panicked the Government. If there is a mining fight round two, the Government has several more years of painful Dutch disease to blame on the miners. Recent consumer confidence figures kind of suggest that folks generally see the end of the mining boom as a plus. Could this sentiment be turned against the big three miners as the economy weakens? Second, the tax is already agreed. Refusing to rebate the royalties rises is a far simpler fight to communicate to the public than the original RSPT.
The miners, on the other hand, have the deal to wave around. They can claim betrayal and make the ostensibly sensible argument that there are no super profits any more. They have Tony Abbott in the wings with an ongoing pledge to scrap the tax altogether. And for him, why not, it doesn’t make any money anyway! That leaves the miners free to go for broke in a second media-led putsch.
The media itself is better armed with knowledge but would almost certainly line up against the government. The Business Spectator/AFR business cheer squad would go for the jugular (indeed, their campaign is under way). You don’t need to even ask what The Australian would do. That leaves the weak Fairfax dailies and the ABC to carry the case. Good luck with that.
The wider business community, which also lined up with the miners in the last stoush, against its own interests, would probably do so again based upon a tribal hatred of government. After all, with the boom fading swiftly anyway, there’s no need to encourage higher taxes in any form now and I;m sure it would prefer an Abbott government.
Does the Government have the stomach for it? I remain doubtful.
