From the Minerals Council via the AFR:
So what are the causes of the budget problem? Spending growth and a rough deal on GST distributions.
They are a bit tougher to deal with. And the problem with treating symptoms rather than causes is that they make things worse, not better.
Take the Grylls case. He wants to raise at least $7.2 billion over the next four years.
The Grylls’ proposal would increase the tax burden on Australian iron ore producers to three times that of our major competitor – Brazil. A major hit on new investment is inevitable.
His tax would be equivalent to a $290 per tonne carbon tax, a burden 10 times higher than that imposed by the Gillard government’s carbon tax.
Grylls would be better advised to target the causes of the problem, not the symptom.
And there is a real policy point at the core of this issue. And it is not just about endowment of resources. It is about how states either promote or discourage minerals development in their jurisdictions.
In their current form, the Commonwealth Grants Commission formulae arguably punish those states, like WA, that welcome investment in resources development.
This is because the more revenue these states raise by promoting mining development, the more likely they are to receive a lower share of GST payments.
There is nothing more gratifying than the rent-seeking narcissist empathising with policy. Australia’s social contracts, endowment of resources, tax equalisation regimes, economic diversity all crushed through a tiny mining aperture through which the entire nation must be governed. WA has been a long term beneficiary of horizontal fiscal equalisation including in the first half of the mining boom when the lagged GST formula did not adjust its revenues to its booming circumstances.
The Minerals Council does not care about WA taxation, GST, other states, other sectors, other Australians, Australia itself. It cares about dirt and lots of it. So why is it published as if it has authority on wider issues?
Meanwhile, media obtuseness and/or corruption extends to The Australian:
Japanese steelmakers have joined local iron ore producers in a rebellion against “job-destroying” plans in Western Australia to hike iron ore mining royalties to raise $7.2 billion.
Plans from WA Nationals leader Brendon Grylls to hike royalties from 25c to $5 a tonne came under strident attack from mining executives from both countries at this week’s Australia-Japan Business Co-operation Committee in Melbourne.
The comments came as BHP Billiton’s Arnoud Balhuizen warned the tax grab would “destroy jobs and community investment” in WA, while Rio Tinto’s Chris Salisbury described it as a “potential hurdle of huge proportions” in a conference session.
Co-chairs of the conference, businessman Sir Rod Eddington and Nippon Steel’s Akio Mimura, both used the post-event press conference to criticise the move and warn it sent a strange signal and would put investment at risk.
“Both the timing and the magnitude of the increase were clearly a concern yesterday in the resources session,” Sir Rod said.
“Increased taxes invariably have an impact on enthusiasm for future investment.
Where are the counter views? Where are the numbers? The case for higher royalties is there. WA is clearly not charging high enough royalties when BHP and RIO are operating their iron ore businesses on margins well north of 100%:
These are “economic rents” 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 and Australia. It’s depleting nature needs to be reflected in the revenue being received for their development.
I would like to see WA Nats also commit to paying down debt with the windfall (or to 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.
As it stands at $5 the levy is too high. The amount should be calibrated so that BHP’s and RIO’s competitiveness is not adversely impacted causing them to lose volumes (and therefore investment). That level is more like $2.50 per tonne than the proposed $5 which would put them on par with Vale, from UBS:
Honestly, where are these arguments from Brendan Grylls? Where are they from anyone else?
