From Brendan Grylls:
Western Australia is now borrowing money to pay its teachers and nurses. Our GST share, labelled “absurd” this year by federal Treasurer Scott Morrison, continues to fund infrastructure projects in the east while Western Australia has slipped to dead last on the CommSec state of the states league table. The number of WA people with a full-time job has fallen for 22 consecutive months…it is absurd that in the past decade WA has contributed $149 billion more in taxes to the federation than it has received back in Commonwealth services, welfare payments and grants…Contrary to state governments in the east, Western Australia does not supplement its income each year with billions of dollars of pokies revenue…
…The lease rental charge is not new – the miners have paid it for decades – nor is it a royalty. It is, in fact, tax deductible, and in this case it has not been indexed or changed for half a century. Huge gains in technology and innovation during the past 20 years have resulted in increased productivity with far fewer employees, but has also meant that the proportionate benefits to the state per tonne of resource extracted – in fixed charges, employment and state payroll tax revenues – has been declining in real terms. Add to this, BHP and Rio’s Singapore trading hubs with favourable tax arrangements, international outsourcing of administration-HR and automation of many aspects of the industry in WA have fundamentally changed the resource sector’s real contribution to the state.
…When the iron ore price was $US38 a tonne last year, Rio Tinto chief executive at the time Sam Walsh declared that his company was “thriving” as a low-cost producer. Yet today with the spot price near $US70 we have former Queensland premier Campbell Newman emerging from political obscurity to declare his concern for the “viability” of companies that in the past 10 years have averaged more than 50 per cent return on their iron ore assets.
MB obviously sympathises with WA to the extent that its subsidy of the eastern suckhole economy is of extraordinary magnitude:
However, the state dug it’s own grave (pun intended) by spending like a drunken sailor throughout the boom and the lagged fiscal equalisation mechanisms over-delivered for years before under-delivering, so I don’t buy the first argument.
The second and third arguments are true. Though affordability for the miners will change over time. And $2.50 is a better number for the levy to ensure that no investment is lost to Brazil in the future:
Nonetheless, today the miner’s Pilbara margins are above 200%:
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 and Australia. It’s depleting nature needs to be reflected in the revenue being received by them and us. The tax take should be more like 80% (not kidding) such as it is in Norwegian oil.
By the same token, Mr Grylls should 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.
