The astonishing ineptitude of the MRRT (updated)

Peter Martin today has the most extraordinary description of the MRRT negotiations that took place in the Cabinet Room in 2010. It is reproduced in full below with permission. I challenge anyone to read this and not feel angry at our so-called “elites”.

Gathered on one side of the cabinet table were the newly-installed Prime Minister Julia Gillard, her Treasurer Wayne Swan and her Resources Minister Martin Ferguson. On the other were the heads of Australia’s three big mining companies: BHP Billiton, Rio Tinto and Xstrata.

Absent were the key people from the Treasury – the ones who really understood the tax being discussed.

As the then Treasury head Ken Henry later told a Senate committee: “We were not involved in the negotiations, other than in respect of crunching the numbers if you like and in providing due diligence on design parameters that the mining companies themselves came up with.”

The 1½-page heads of agreement signed by the ministers and executives on July 1, 2010, replaced the 40 per cent resource super profits tax with a much weaker 30 per cent minerals resource rent tax applying only to coal and iron ore. An “extraction allowance” cut the actual rate paid to 22.5 per cent. It would be paid only if the profits themselves reached a much higher hurdle.

And then there was the drafting error.

The agreement allowed “all state and territory royalties” to be deducted from the tax.

Ferguson thought the words referred to “royalty rates that applied, or changes to royalty rates that were scheduled to apply in the future, as at 2 May 2010”.

The interpretation made sense. Those were the royalty rates referred to in the original super profits tax. Agreeing to refund whatever any state government chose to charge in the future would expose the Commonwealth to an uncontrollable expense.

But read baldly, that’s what the ministers had signed up to.

Western Australia promptly lifted its iron ore royalty from 5.6 per cent to 7.5 per cent. It now grabs money the ministers believed the federal government would get.

Appearing before the Senate, treasury official David Parker later tried to explain the less-than-precise drafting this way: “This is a document which is 1½ pages long. One could say that the heads of agreement is, to use a musical analogy, a rather staccato document.”

The agreement allowed the mining companies to do more than deduct their royalty payments from the new tax. It allowed them to ”grow” the amount they could deduct at the long term bond rate plus 7 per cent, if low profits meant they owed less resource tax than the royalty payments.

The concession means the miners are unlikely to pay much of the new mining tax for some time to come.

Julia Gillard and her ministers brought peace on July 1, 2010, but at a heavy financial price.

And now, from the AFR:

Dr Parkinson said its revenue estimates – including as recently as the mid-year budget update – “drew heavily” on information provided by the resources industry when the minerals resource rent tax was first negotiated.

However under the agreement negotiated between miners and Treasurer Wayne Swan, companies were under no obligation to provide Treasury with any subsequent changes, according to the secretary.

There are credible estimates that the RSPT would have generated an additional $100 billion over the next ten years. Some estimate even higher. This was thrown away on the back of a napkin. I am lost for words.

Comments

  1. reusachtigeMEMBER

    Another reason why I will be voting informal choosing a new box titled “None of these c….”

      • reusachtige, your disgust is widely shared, though perhaps not your solution.

        Dr Terry Dwyer wrote to the AFR today. Quote:

        TAXES? REALLY?

        I confess I dislike taxes as much as the next man. I am happy to advise people on how to minimize them legally and honestly.

        But the advertisement by the Minerals Council of Australia saying the mining industry has paid $130 billion in taxes since 2000 is not honest. A royalty paid is a rent. A royalty is definitely not a tax. It is a rent paid to the Crown as the owner of the minerals. Whether or not the Crown has been charging too little or too much or should charge its rent in a different and better way are separate questions.

        A mining royalty is no more a tax than what you or I have to pay a hotelkeeper to use his rooms. I would much prefer the Crown collected all its rents and left wages and profits untaxed. The only legitimate complaint the Minerals Council has is that its rents are being charged for while useless urban land speculation pays nothing and is subsidized by lax monetary policy.

        Dr Terry Dwyer
        Dwyer Lawyers

        • Couldn’t agree more.

          In the case or mining the royalties are best described as a purchase price of minerals in situ upon their extraction and sale. There is a clear transfer of ownership as the ores/gases etc are owned by the State but are sold to third parties, often with relatively little transformation other than extraction and crushing.

          The claim that they are a tax shows the blatant dishonesty of the mining industry imo.

        • The major failing was that of state governments (Labor and Liberal) to capture any share of the upside in the infrequently repeated commodity booms.

          The MRRT has provided an incentive for state governments to rectify that position by increasing royalties at a time of high commodity prices. As the owners of the resource, that is a fair outcome compared to the mining companies getting the full benefit of extraordinary commodity booms or the federal government getting an income tax windfall from resources they don’t own.

          The federal government ought now revisit the amount of assistance and grants paid to those states that have the benfeit of the royalties, particulalry those that have been increased since the MRRT and adjust shares between the states.

          None of the above is to defend the design, implementation or negotiation of the various forms of the tax.

          Rudd’s demise seems as much to have been a function of personality flaws and too rapid, too large policy changes without gaining support of colleagues and a failure to treat many colleagues (and a certain air hostess) with respect as it does to have been a function of a poor political or fiscal decision regarding the mining tax in its various iterations.

      • I think he is referring to the designers being the miners. Like 3D1K says, the tax is working as designed.

      • The design was not ‘inept’, it achieved the desired/designed outcome.

        I have commented here along the lines of Peter Martin’s article for many months, have faced much criticism of my criticism of Gillard et al.

        Only now are some coming to realise the level of incompetency involved, not just on this issue. I have said before, I say again, Gillard must go. I see Peter van Onselen suggesting similar and demanding that Swan does.

        I have always been very straight on this issue but it has taken months to media, all to keen to support Gillard, to understand.

        • You have not been straight at all. There is another side to the story which you have never reprimanded, the miner’s part in it all.

          I have never seen the detail about the typo. It is beyond remarkable. All three should lose their jobs, simple as that.

          • Tthe miners acted in their own, their employees and shareholders interests.

            They pay all corporate taxes and royalties and are good corporate citizens. No reprimand required.

          • No. All three should be in jail.

            Their wholly self-serving actions sold out the nation’s interests. To foreign miners. At the expense of their locally-owned competitors most directly. And the citizenry less directly.

            They are treasonous POS.

          • constant gardener

            It’s not like the Real Estate and Finance sector don’t make full use of the leeway they are given by the Government.

            The Governments job is to manage the “commons” which includes natural resources, minerals, land, water and such.

            It’s the same almost everywhere in the world – governments are a huge failure and replacing one set of inept bastards with another won’t change a thing.

            Bring on direct democracy like the Swiss have. It should be pretty simple and effective these days with Internet based solutions to have direct voting on issues. To have grass root referendums and initiatives. The head of state (President) is only symbolic, the swiss actually have 7 “Premiers”.

        • Only now are some coming to realise the level of incompetency involved, not just on this issue. I have said before, I say again, Gillard must go.

          This time round, I hope the miners will give the plebs the courtesy of doing the job?

          Otherwise, the miners == Eddie Obeids for the whole of Australia – Come in the way of swinging another mining deal our way? Change the PM… (rinse and repeat).

        • dis·in·gen·u·ous
          /ˌdisinˈjenyo͞oəs/
          Adjective
          Not candid or sincere, typically by pretending that one knows less about something than one really does.
          Synonyms
          insincere – false – devious – hollow-hearted – 3d1k

          • Smithy, the one thing you cannot say is that I have been disingenuous in regard to the mining tax.

            There are but a few that know events that transpired. I have never pretended to ‘know less’ about this one.

            Watching events unfold – everything I have advised here over the past months, most of which was fiercely rejected on political grounds, is proving prescient.

            And now you know I was right!! It is a delight!!!

        • pingupenguinMEMBER

          That is disingenuous and you know it. No one is arguing that the miners are not paying their royalties/tax. It is the nature and fairness of the tax that is in question and whether it is appropriate.

          • ping
            Then we ought be considering the over-all taxes of all sectors.
            The attempted confiscation of mining investors’ assets vs other investors’ assets i simply not right nor ‘fair’…which is the word so blithely thrown around these days.

      • It’s not our dirt. We sold it long ago for trinkets! It was our choice.
        We will not change until we recognise we ourselves are to blame for the consequences ofrf our own actions.

    • dumb_non_economist

      2d, you’re your own worst enemy. I guess you don’t really wonder why some of the posters here detest you.

  2. I believe that WA had announced that they planned on lifting the royalties long before the discussion of any super or MRRT tax.

    Iron Ore is so profitable its sad that the government couldn’t get its act together, I am glad that other less profitable commodities aren’t under the same regime.

    The most depressing fact of all, is that Labour has already spent the $2b that they never raised.

    • Labour always spends money they haven’t raised – then to fix the problem they raise more taxes.

      The debacle over the MRRT can be added to the list – unfortunately we don’t have the political will to do what is right in Australia.

      Western Democracies are about politicians getting re-elected and economies being fueled by ever increasing levels of debt.

      It’s going to end in tears.

      • Wait until the carbon tax becomes a carbon price. Estimated price used in the forward estimates – 23 cents a tonne. Actual price at the moment – 5 cents a tonne (and heading south). There goes another $8 billion or so a year that’s already been allocated.

      • constant gardener

        It does not matter what government we have, it will end in tears and it’s happening right before our eyes, just slow, “subthreshold” enough most people don’t notice.

        Just because the stock market looks great does not mean things are getting better overall.

        The total level of private debt was already at record levels when Labour got into power after what – 10 years of Liberals, meaning we were already lined up for a major downturn.

        Our government is now kicking the can down the road with their deficit spending and there is nothing I can see that will pull us out of our growing total debt trap any time soon, quite the opposite.

        The next leg down to the bottom is as our government is re-starting the plunder of previously protected wilderness areas which can be witnessed from Tasmania up to Cape Tribulation over to the Kimberleys and on and on.

        There will be nothing left in the end.

        We people would shovel live baby harp seals into our furnace to keep warm and ipads going and then tell ourselves that it’s for the best.

  3. The only reason this tax ended in such a mess is because this cabal of traitors were consumed with getting themselves into power. Whatever one thinks about the morality of the tax, Gillard and Swan took their eye way off the ball, allowing themsleves to be outwitted by legitimate tax paying companies. And then proceeded to squander revenues they would never receive. There is ineptitude for you.

    I am not and will never buy into the furfy of the miners deposing Rudd. That nasty piece of wet work was handled by Gillard, Bitar , Howes, Shorten, Swan et al. It was an in house hit.

      • ” The miners very obviously played their part”

        Minor part. Insignificant, compared to the ALP machine’s efforts. As can be seen even since Rudd’s removal.

      • rob barrattMEMBER

        As is yours H&H. The fact is, if you go into a negotiation full of your own self importance and don’t take expert negotiators with you, you’re going to get your dick cut off. I must admit I’m getting a little tired of the “anything but the liberals” mindset. In fact, if you really cared about Labour values, you would be falling over yourself to remove this lot, because they are all owned by faceless grafting men, and will never be able to impose the legislation necessary to clean up the corruption of which the Thompson “allegations” must be merely the tip of the iceberg. A strategic vote would allow for the other side to:

        Remove dead wood like Fair Work Australia;

        Force unions to accept the same auditing practices as limited companies, and

        Rein in mafias like the CFMEU.

        And if you respond,” but they’ll impose their own corruption!” – yes they will, but that will have the effect of repairing the Left, which is now reduced to a Rum Corps, at state and federal level.

    • GSM, you slightly overplay the treason of Gillard and Swan, and grossly underplay the actions of the Big 3 foreign-owned miners.

      BHP drafted the redesigned tax –

      “A raft of emails released under FOI shows that BHP was very much running the show. Its executives drafted the heads of agreement before emailing it to Wayne Swan’s office for approval.”

      … had their head lobbyist – a former ALP national secretary – provide private focus-group research directly to then ALP national secretary Karl Bitar –

      “…Geoff Walsh delivered the Mitchelmore research directly to the then ALP national secretary, Karl Bitar. These claims are strenuously denied by Walsh. But the BHP research is understood to have panicked the Labor heavyweights, prompting them to move against Rudd even though he still had a commanding 4 percentage point lead in the national newspoll.”

      … and reportedly “gave the nod” to Gillard to oust Rudd, offering to pull their (ie, BHP/RIO/Xstrata-financed) advertising campaign if she did so and renegotiated. Which she did. And they did.

      You may also be interested in the Big 3’s actions subsequent. Most telling:

      “Not only did the miners change the prime minister and change government policy, they went on to brag about how their coup had stopped similar schemes from spreading around the world…

      Exactly one week after Gillard announced the compromise, Rio Tinto’s American chief executive, Tom Albanese, told a group of mining executives in London that the Australian experience should send a salutary message to governments around the world. Governments should ‘learn a lesson’ from the episode, he declared. A few months later, Xstrata’s chief executive, Peter Freyberg, was still bragging…”

      Quotes above from journalist and ANU researcher Paul Cleary’s book “Too Much Luck”.

      Plenty more here.

      • What this shows, if anything, is how spineless the ALP heavyweights are. Or alternatively, they were not spineless but just needed that little something extra to turn a few more useful idiots in the caucus.

        Either way, it reflects badly on both the ALP and on the fevered hothouse that Canberra has become. Parliamentarians need to spend more time out and about in their electorates in between election campaigns. Then they would know that polling commissioned by BHP should be taken with several buckets of salt.

        • I see you that have reserved judgement on the conduct of BHP and other mining execs – all fair and square there? Bring out that glib line about how they acted in the “interest of the shareholders”.

          Well, they are entitled to act in the interest of shareholders, but not at the expense of undermining the interest of the citizenry. They facilitated the rolling of a sitting PM and installed a puppet PM who then sat across the negotiation table and gave it all away.

          • Using private polling to influence caucus is a time-honoured tradition in the ALP. I don’t see why BHP shouldn’t give it a go. Obviously they thought of this in part because of their recruitment of Geoff Walsh – smart move.

            I don’t know whether they were aware that Bitar et al were intending to use the polling as a weapon to roll Rudd. Maybe Walsh did, given his ALP connections. But did his bosses? They might have thought it would lead only to a Cabinet rethink on that particular issue.

            On balance, they probably did know. But they can’t have known in advance that it would be successful.

          • PS, I see you say “Well, they are entitled to act in the interest of shareholders, but not at the expense of undermining the interest of the citizenry.”

            This is completely wrong. In fact, if they did not act in the interests of shareholders regardless of the effect on the interest of the citizenry, they would be in breach of their responsibilities under the Companies Act.

            BTW, Mav, you are not a member of the citizenry, IIRC.

          • Great, welcome to our bewdiful country. Hope you stay – I would miss our regular sparring bouts here.

          • There is a distinct difference between :

            ALP conducting private polling for its own internal use. Nothing wrong with this.

            AND

            BHP supplying private polling to a few hired guns with the sole purpose of undermining the current duly elected leader of the party and getting a more compliant leader installed. This is a complete perversion of the party process and of democracy itself.

            I don’t know if you are maliciously conflating the two or merely ignorant of the distinction.

          • Consider an intermediate case: Sussex Street heavies (who are ALP members) commission private polling to influence spending decisions on (say) where the Federal government should offer funding for a railway line in Sydney.

            Where do you sit on that one?

          • Why do you need polling on a spending decision? It will be popular everywhere. 🙂

            In any case, it is up to the duly elected PM to consider that polling or disregard it. Heavies can legitimately use that polling to influence the PM’s decision , not effing remove him by circulating it behind his back!

            Now lets look at the counterfactual – Note the stark difference between the public newspoll and the one cooked up by BHP. Rudd was ahead in newspoll. If the heavies had presented that private poll to Rudd to influence him to reverse the mining tax, he would have merely pointed at the newspoll results and told them to eff off.

          • Fair point. Yes, there is a difference. Yes, rolling the PM was going too far. Assuming that BHP knew this was how the poll would be used, this is beyond norms of behaviour in a democracy. But not illegal. And definitely not treasonous.

          • That’s what I think too. Walsh may have been in on the plot. I don’t know how close he still is to his former mates. Or what faction he was from.

          • 3d1k, thanks for the advance warning this time round – that MCA is going to roll Gillard and install yet another Prime Minister.

            Can you let us in on who is it going to be? Shorten? Swanny even?

      • Op8 ,

        Thanks for the link and the info.

        Please let me try to clarify. I don’t consider the Big 3 to be saints by any means. We all know their motives and I dont dispute that. But who they are and what they do and why is clear. They make no bones about it.

        Perhaps I do have an old fashioned outdated sense of what our elected officials are required to represent. First and foremost I think it must be honour. They must be honourable, to execute the job we entrust them to. That so many on both sides fail the test isn’t pleasant to watch. But, in this distatesteful episode in our history the roles and the motives were crystal clear for all to see.

        This country did not elect the Big 3 to look after our interests. That privelige was granted to Gillard, Swan and Ferguson who sat at that now infamous table. Gillard and Swan were the ones with Rudd’s blood on their hands. The Big 3 openly pursued their interests, in full view. (Did anyone seriously think otherwise – really?)I draw significant distictions between the roles, responsibilities and OBLIGATIONS of the 2 groups.

        “Our” team not only failed in the MRRT negotions, they failed miserably at being honourable throughout the whole saga of removing a sitting popularly elected PM. That is the core reason why Rudd was removed in the manner he was – IMO.

    • I am not and will never buy into the furfy of the miners deposing Rudd. That nasty piece of wet work was handled by Gillard, Bitar , Howes, Shorten, Swan et al. It was an in house hit.

      GSM, let us not rush to a solemn declaration of innocence even before an investigation is performed by competent authorities. There is a lot of circumstantial evidence out there from multiple sources including Twiggy Forrest. All it would take is a couple of subpoenas to the sources to prove or disprove innocence.

  4. I’ve got to agree with 3D on this item. You cant blame the Mine exec’s for Gillard an co’s poor contract negotiating skills. Based on what I have read I’m surprised the average tax payer didn’t end up actually funding the miners.

    The only recourse for Gillard is to point out what happened to the guy before her who had suggested a tougher agreement.

    As an aside it never ceases to amaze me how “contract drafting” mistakes often favor the political interests of the participants that made the mistakes. I’ve seen this again and again in private business, and it holds double in gov’t contracts.

    • dumb_non_economist

      China_Bob,

      How would a US Gov respond if it had been screwed like that when the miner/oil company came knocking to do business again?

      If you ask me they should have the boot sunk into them. A simplistic approach for me is to wait for a change in state gov and ratchet up the royalties rate until it hurts.

      • Who are you trying hurt dne? Under MRRT if royalties are ratcheted up, the are simply reimbursed under the tax mechanism.

        For minerals not covered by MRRT what is the point of ratcheting up royalties on commodities, values of which are volatile, to the point of making project uneconomic. Cut off your nose to spite your face.

        • dumb_non_economist

          2d,

          I don’t care where the extra tax goes, state/federal, I’m indifferent. If the feds think it needs to be spread further I guess they would achieve it via the GST breakup. I just think IO/coal should have been taxed higher, by whatever method, with the sky-high prices that were achieved.

          As to ratcheting up until it hurts I was being sarcastic, I’d use royalties to recoup what the revised MRRT lost. I’m not anti mining, there are just sectors of it they should be paying more while prices are where they are, and YOU are in that sector, IO.

          • Of course when io prices (or any commodity)are strong the likelihood is that greater profits will be generated, that higher levels of corporate tax will be paid along with high levels of royalties.

            In other words, additional taxes are paid in the normal course of business when higher profits are achieved.

            No need for an additional surcharge on profits via a super profits tax at all.

          • dumb_non_economist

            2d, with the IO/Coal boom the royalties increase wasn’t happening. If you mean higher levels of corporate taxation based on increased profits, doesn’t cut it. By higher royalty levels I bet you mean on higher volumes (tonnage), sorry, again doesn’t cut it.

            Australia needed to be taking a MUCH larger cut of the pie on top of what taxes would have been paid. Whether the windfall was properly utilised is of no concern to any mining company, that’s only the voters right to determine.

          • dumb_non_economist

            2d, because it’s our resource with a finite life and we are letting it go too cheaply. What was the per tonne price in 2000, $20 USD p/t?? And no, costs haven’t gone up to the same extent.

            Sorry, I’m guessing the why is to the bigger cut, if so, answered. If it’s to do with the concern whether the gain is squandered, miners are not voters, their shareholders are and those that have Australian residency can voice their opinions at the poles. For those o/s it’s none of their business.

          • To Non-economist. Can I end this furphy about royalties being a tax on volumes….

            In iron ore and coal it is a set % of revenue.

            That is volume x price.

            There is price participation in royalties.

          • Also – as for finite life. Should we really be too worried about a finite life when there is thousands of years of the stuff?

          • dumb_non_economist

            MiningMan,

            Thanks for the % of rev, unaware. Ok, so the % should be higher!

            As to life, is that thousand yrs for WA IO?

      • DNE, I dont know, I guess it depends on just who’s wearing the jackboots.

        We saw Halliburton get away with a lot under GWB, there was tough talk from embarrassed politicians but I dont remember any real pay-back.

        Now when BP f’ed in the gulf up they got both barrels and a $20B fine to boot even thought the were not really the ones who caused the whole mess.

        • dumb_non_economist

          China-Bob,

          Halliburton never surprised me due to their political connections. I’d have thought that RIO/BHP would have the same level of connection here that BP appears to have there.

    • Poor negotiating skills?

      Oh please. It wasn’t a negotiation, it was a meeting to find out what the mining bosses needed to withdraw their anti-labour campaign. Then granting it, to further their own personal careers and the party’s interests.

      I highly doubt the idea of ‘what’s best for the country’ ever came into the equation

        • Ahhh .. no. They won’t need Centrelink. ‘Tis another pet beef. The [insert perjorative/s of choice] will happily swan off to “retire” on 6-figure, taxpayer-funded pensions. Not to mention all the free travel and furnished office perks, and well-remunerated directorships, “consultant”/lobbyist/bagman/Judas roles for the private sector (eg) BHP.

          • “.consultant”/lobbyist/bagman/Judas roles for the private sector (eg) BHP.”

            Not likely. Well, Ferguson….maybe.

  5. I can’t believe they didn’t have an egghead from treasury in the room. It’s obvious they just wanted a quick political solution and all other considerations were secondary.

    It’s been like one long facepalm since they knifed Rudd. Useless.

  6. Let us be clear.

    Gillard and Swan did not “draft” the newly designed tax.

    BHP executives did –

    “A raft of emails released under FOI shows that BHP was very much running the show. Its executives drafted the heads of agreement before emailing it to Wayne Swan’s office for approval.”

    As noted in Peter Martin’s article and in numerous others prior, Gillard and Swan consciously chose not only to exclude the locally-owned miners from the negotiations. They also chose to exclude Treasury officials – folks who just might have more of a clue than a dodgy lawyer and a career political hack with an arts degree – as well.

    Conclusion? Gillard and Swan did not want any intelligent outside scrutiny of the BHP-drafted deal.

    Hence the persistent “commercial-in-confidence” BS cited ever since, in attempted justification of their refusal to let the details come out.

  7. dumb_non_economist

    I don’t accept that the royalties statement was misinterpreted, the effect of that was as plain as the nose on your face. I would have seen that as an issue and therefore don’t accept a bloody lawyer (Gillard) could possibly miss it. The Treasury Official’s reasoning is just bs.

  8. 3d1k, Iwould be most interested to know your thoughts on one particular, but IMO, vital nuance of this issue.

    Many have argued that the redesigned (by foreign-owned miners) MRRT advantages the Big 3’s oligopoly, and disadvantages their smaller locally-owned competitors –

    “Repeating her ‘moving forward’ mantra, Gillard announced the compromise like this: ‘It moves things forward whether you’re a coal miner in the Bowen basin, a contractor in Karratha, an opal miner in Coober Pedy or a young worker in Sydney’. In fact, the MRRT deal made life worse for smaller Australian-based miners by removing the resource exploration rebate and by awarding big miners a significantly lower tax rate. For iron-ore miners with mature projects, which means the big companies, their projects would be taxed at 36.4 per cent – close to or even below current levels – whereas small or medium-sized projects would pay an average rate of 48.9 per cent, according to modelling produced by Treasury and released under FOI. The big miners benefited from a concession that allows them to calculate deductions for tax purposes using the market value rather than the purchase price (or ‘book value’) of their assets, providing huge depreciation allowances. The small and medium Australian players were not represented in the negotiating room, and the new deal actually reversed the central and laudable aim of the RSPT – that is, reducing the tax burden on start-up operations, which are penalised by the state royalties because the impost is paid when production starts, rather than after the company actually begins to make a profit.”

    Setting aside the issue of whether any mining tax should have been imposed at all, do you (a) personally, or (b) professionally, have any thoughts you are willing to share regarding the accusation that foreign-owned miners have been advantaged, at the expense of their locally-owned competitors?

  9. Slight digression ladies and gents – if a massive mining oligopoly could achieve this sort of thing………then why couldn’t they have the means to manipulate the price of iron ore, irrespective of real demand for the end product?

    • Cuz China, the price maker, has shown it will put them in gaol.

      One thing you have to remeber about mining execs, they are amongst the most cowardly people on the planet. Once a government stands up for its sovereign rights, they back away, as all cowards do.

      But if assertiveness is lacking, then they will pursue self-interest for all it is worth.

      • The people in charge reside outside the sphere of Chinese law – you can’t put someone in gaol if they aren’t there.

        Otherwise, the ATO would simply have marched into Majorca, collared Christopher Skase and dragged him back to an Australian prison right from the word go.

        • Isn’t there a former Australian RIO exec in a chinese gaol right now?

          And you can’t manipulate the price the chinese are going to pay outside of china.

          Majorca, well again, it’s all about testicular fortitude… Mossad doesn’t pay much attention to things.

          • I’m just pondering what reasons may have allowed the laws of supply and demand to appear to be be completely overridden, with ore prices going – and remaining – stratospheric, while ore stocks, steel output and steel prices go in the wrong direction or stagnate.

        • “The people in charge reside outside the sphere of Chinese law – you can’t put someone in goal if they aren’t there.”

          I’d respectively suggest this is a little naive. That whole Stren Hu business stunk, read how the charges were changed because the original charges would have required Rio Exec’s to be indicted for bribery. No that was a political message make no mistake about that China was talking Loud’n’Clear. Rio was only to happy to deliver Stern and join the feast by laying in the boot.

          I’ve had too many dealings with powerful Chinese interests to not understand the subtext of that little escapade. If they had not listened than China would have become a no go region for all Mining Exec’s.

          One time I was staying at a Hotel in Shanghai and two drop dead gorgeous girls (probably under age) knocked on my door at about 1am. They were very insistent that they must come in because they would be in big trouble if I did not “like” them, they seemed genuinely scared. Well I got rid of them and about an hour later surprise surprise state security police turn up at my hotel room. Apparently some one had forgotten to tell them I didn’t let the girls in. They were screaming “where are the girls”, They even had an English speaking cop along for the ride. Accidental, I don’t think so!

  10. 1) Its funny how this has all just blown up. Most people who understood the tax knew it would raise next to nothing months ago. The forecast of $4bn then $2bn didnt pass the laugh test.

    Why does this government always think its best to mislead and then have a ticking timebomb of a problem (floating carbon price is next one)

    2) Treasury didnt understand their original tax properly. All theoretical eggheads who dont understand mining. Excluding them would have been ok if the negotiators knew their bit, were diligent and were smart.

    3) raising royalties by state governments hasnt had the impact people think it did. If QLD and NSW has their orginal royalty rates then the tax would still raise the same amount – zero from coal. WA’s royalty hikes would have had an impact on iron ore though.

    4) Current iron ore prices would see a big lift in MRRT this half. Interesting to see if that comes in time to save Swan/Gillard.

    • re 4) … Fail. The Big 3 have accrued mountains of lovely credits with which to offset any MRRT liabilities, for years hence.

      Just another “design flaw”.

          • I attach a link to the legislation.

            S65-5 talks about this issue. Essentially if you have a royalty allowance that wasnt used up from a prior year, then you can transfer them in to offset liability.

            S65-20-1(a)stresses the need for them to be integrated operations in order to transfer.

            S255-5 defines stresses that to be integrated it needs to relate to all coal or all iron ore but not both.

            What does this mean? Royalties and losses (according to other sections) that are carried forward are quaranteened to each commodity.

            http://www.comlaw.gov.au/Details/C2012A00013

          • Thanks. With caveat that I am not a lawyer nor a mining exec, just an interested layman, it seems that the sections you’ve cited all relate specifically to royalty credits. Chapter 3 of the Act spells out a raft of additional areas for which “allowances” (ie, credits, “uplifts”) can be accrued to offset MRRT liability. It is unclear to me whether your assertion re quarantining of credits holds true for all of these areas of potential “credit” accrual, or, only for royalty credits. I grant you that it would appear so (eg), S95-20-(3). But in absence of lawyering up and forensically examining the entire act, I remain sceptical that what was clearly a Big 3 miner-drafted tax does not include plenty of “flaws” and loopholes that their lawyers/accountants can exploit to postpone liabilities for as long as they find best suited to their interests.

          • I am no lawyer neither – finance dude. Here is an explantory memo. It is an extremely complicated tax – which it needs to be if you are to tax income on the resource. Royalties dont look that bad by comparison. Simple, effective and hard to accountant your way out of. Something the academics and all their talk about reducing deadweight loss and taxing the rent, bulldust couldnt understand. Along with the theory that applying a tax on an industry wouldnt change behaviour….

            http://archive.treasury.gov.au/documents/2157/PDF/MMRT_exposure_draft.pdf

  11. In retrospect, it’s a pity Rudd didn’t have his wits about him when he was advised he didn’t have the numbers. He should have rushed off to Government House immediately, got the GG’s rubber stamp on an election, then held a press conference to announce that the election was being held because persistent speculation in the media about a possible change of leadership was destabilizing the government, so he was going to the people to seek a mandate for his continued leadership of the nation.

    Then he could have walked into that morning’s caucus meeting to present the fait accompli.

    • There is a fly in the ointment – GG is the mother-in-law of one of the coup leaders.. She would have made herself scarce until next morning 😉

      • Only if she and Bill thought Rudd sufficiently bright and sufficiently Machiavellian to come up with such an idea. Of course, he isn’t, so they had nothing to worry about.

  12. The Labor government knew EXACTLY what they have gotten into. If they wanted to change it, there were plenty of opportunity to do during the legislative process.

    Look at the mess with Obeid and Ian McDonald right now. The ALP NSW Right fraction is a cancer to the party, and it has spread to the Federal ALP. I’m sure that some people got very, very rich from this.

    • You are absolutely correct. They knew exactly. Craig Emerson said he did not expect the tax to gather much in revenues in the first years. He cannot have been the only one with this knowledge.

      Here is the original Argus/Ferguson Policy Transition Group Report. Readers will see every aspect of the tax was clearly defined. Further, this tax endured much scrutiny through Parliament, including scrutiny from those Independents and Greens not crying “we woz robbed”.

      I can only assume they at least read this report, if not the final Legislation itself.

      http://www.taxwatch.org.au/ssl/CMS/files_cms/186_MRRT%20Report.pdf

  13. GunnamattaMEMBER

    Sorry I havent been here chaps, been out for the day……..

    Got to tell you this is a classic read, both the interpretation of what happened in the negotiation of what happened and the comments about it, particularly 3d1k’s taunting casuistry on behalf of the mining lobby.

    It reminds me of something I was told more than once over a long period of association with Russia, in that whenever I raised issues of corruption and politics some very very senior Russian business and political types would always tell me ‘Dont think it doesnt happen elsewhere, even Australia,’

    At a certain level it simply underlines the need to have politicians with enough fortitude to stand up to mega scale business and poke chests if need be. And little is more illustrative of the contempt with which large interests will treat any political impulse than 3d’s comments – play one lot of politicians off against another – within parties and between them, inside states and federal systems, and of course between one nation and another, until you find the lowest level cretins you can make a deal to suit you with.

    Australia and the ALParatchiks produced the cretins – federally and at NSW level to say the least – and it will cost them the next election. But the Torynuffs are no less cretinous though, and no less likely to turn up a batch of punters only in the system to milk it.

    When all is said and done we have an electoral system deep in the thrall of vested interests and no more cognizant of or interested in the interests of everyday people than what it can slip by them to produce a profit for a small minority.

    But the next time I read in a newspaper somewhere about the injustice of some business type being arrested on a plane by security types, or being pulled in on corruption charges in front of a dodgy judiciary, or maybe some business underlings being given a belting by pseudo policemen in some kleptocracy somewhere, and the ensuing endless parade of indignation in the english language press (in particular) you can be sure I will be thinking of, and almost certainly refer people to, this posting and the comments that follow – just to make sure I dont go all starry eyed about democracy or free markets, and the benefits of capitalism.

    And the next time I am in Moscow and am asked about the need for greater privatisation and transparency, or the need for more enterprise or capitalism, or for business to be heard in government, or the benefits it can bring people – well I will for sure be thinking, and probably tell them as well ‘Just keep going as you are fella’s, give the business types an occasional belting. Theres nothing better of substance on the other side, it is just marketed better,’

    • No causistry, taunting or otherwise, from me mate. Exasperation yes.

      I played a role in the anti-RSPT campaign – a worthy cause and a good win. RSPT was a dog of a tax – just ask HnH.

      I take it you read the Ferguson/Argus paper linked above? There you will find the essentials of the MRRT PRRT transition – well documented, widely available and it seems, little understand.

      This whole debacle is more about the competency or otherwise of our political leadership and said leadership’s propensity for expediency at any cost.

      The tax will work as designed.

  14. If this was deliberately done by our government then it should be Gillard and Swan sent to the tower for treason.

    If you don’t have a tower yet then maybe it could qualify for a first home builders grant.