The news this morning in the ongoing mining tax stoush is good. The ATO it appears is not prepared to lie down quite so easily as our politicians:
Miners risk falling foul of the Australian Taxation Office over valuations used in calculating mining tax as desperation for revenue grows, tax experts say.
The Tax Office has made it clear it will closely inspect valuations and experts say disputes are inevitable, based on experience in similar fields.
“If they are really unhappy with the way a lot of valuations look, I think the ATO has clearly flagged that it’s something they’re quite prepared to challenge,” Ashurst partner Teresa Dyson said.
The story goes on to detail all of the terrible difficulties in assessing the tax, especially with reference to the valuation of mines, which has become the focal point of the tax’s failure. All of this is just smoke.
The simple fact is, a resource rent tax is designed to capture economic rents. Rents are essentially the windfall profits derived from monopoly. They hold an especially compelling case for higher taxation for mining because the resource is non-renewable and, ultimately, owned by the people.
If you use market valuations for mines to calculate rebates then by definition you are including the economic rents in the asset’s value. Every time you increase the tax take, therefore, the asset values are commensurately written down and there is no tax to pay.
The MRRT in its current form is like an Escher painting, the more you climb the stairs, the lower you go. Meanwhile, the rents are issued to shareholders and executives.
That is not to say that a fixed resource rent tax would not have its complexities. But last time I looked my tax was pretty complex too.
