From the Yahoo:
Malcolm Turnbull has condemned Brendon Grylls’ proposed $5 iron ore tax on Rio Tinto and BHP Billiton, saying it would discourage investment and reduce WA’s competitiveness.
Speaking in Vientiane, Laos, where he was attending the East Asia Summit, the Prime Minister called on the WA Nationals leader to reconsider his plan.
“It’s a State issue, of course, but we view with great concern, as does the whole business community, the imposition of substantially increased taxes on particular, nominated companies,” Mr Turnbull said.
“It obviously sends a very troubling message to mining companies and other people considering making long-term investment.”
Under the proposal, the 25¢-a-tonne “production rent” on iron ore would increase to $5 a tonne for the two biggest miners, generating $7.2 billion over four years.
Mr Grylls has argued that the plan may spur efforts to get WA a bigger share of GST revenue.
Premier Colin Barnett has rejected the plan but Rio Tinto and BHP Billiton fear it may gain popular support ahead of next year’s State election.
Mr Turnbull said Mr Grylls should consider how his plan would affect WA beyond the immediate revenue. “It’s a State matter, but what Brendon Grylls needs to consider very carefully is the impact of what he is proposing on the long-term investment in his State upon which the State’s prosperity has depended,” he said.
Mr Grylls said the PM was “no friend of Western Australia” and that his $5 tax was the only alternative to addressing the State’s structural deficit.
“This is a Prime Minister who labelled WA’s GST unfair and then did nothing about it,” Mr Grylls said. “It is WA’s disgraceful GST share which is the biggest challenge to the State’s competitiveness.”
PMT is right that the proposed increase to royalties is too high and will impact the big two’s competitiveness. But he’s wrong on everything else. Strayan dirt is the finest in the world and it’s not going anywhere regardless off tax levels so notions of sovereign risk are silly.
WA is clearly not charging high enough royalties when BHP and RIO are operating on margins well north of 100%:
These are super profits and the people of Australia are being reamed for the privilege of developing their dirt. Remember that this is a non-renewing natural resource owned by the people of WA. It’s depleting nature needs to be reflected in the revenue being received by them.
This debate is about equity and investment. First, the Australian people should be getting more. Second, the amount should be calibrated so that BHP’s and RIO’s competitiveness is not adversely impacted causing them to lose volumes (and investment). That level is more like $2.50 per tonne than the $5 which would put them on par with Vale, from UBS:
I would like to see Mr Grylls also commit to paying down debt with the windfall (or invest it strictly in infrastructure or an SWF). If the debate is about equity over generations then the revenue should be accordingly distributed over time.
That would be “civilised capitalism”.
