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The Mining Mega Bucks Tax (Resource Super Profit Tax - RSPT)

Tue 08 Jun 10 Comments (5)

Scott Zackeresen – Political Coordinator

What IS all this argument about? What does it mean to LHMU members? I wanted to get a better understanding and checked it out. Here's what I learned.

 

This is a correction on the gap that has widened on what big companies pay to the Australian people. It is a tax on the 'super profits' of the mining sector - a narrow band of profits well above what companies normally make, not on the whole cost of their operation. Expenses and ordinary returns on investment are not included in the tax. 

 

The Australian people own 100 percent of Australia’s natural resources and deserve a fairer share of the super profits mining companies (many of them foreign and sending profits out of Australia) make during a boom:

  • As mining companies' profits have risen in recent years the Australian people's share of those profits has fallen
  • Before the last boom, Australians got $1 in every $3 of mining profits through royalties and charges but at the end of that boom, that was down to just $1 in $7
  • Profits wer over $80 billion higher in 2008-09 than in 1999-2000, yet governments only collected an additional $9 billion in revenue
  • The tax would take the Australian people's share of mining profits closer to where it was in the early 2000's
  • Some highly profitable companies will pay more and others will pay less, but independent modelling shows mining production as a whole will grow by 5.5 per cent.

 

The proceeds will be invested in superannuation savings, new infrastructure, and tax cuts. Workers and families will benefit from an increase in their superannuation from 9 to 12 per cent and small business will pay less tax – dropping from 30 per cent to 28 per cent and a $5,000 tax break.

The government takes 40 per cent of the supernoremal profits of companies if and when they became profitable. And the government fully refunds to companies the existing state production-based royalties.

The super profits tax will remove royalties - meaning that mining companies won't pay tax until they are profitable - indeed until they have earned a return om their investment. Mining companies will not pay the new Resource Super Profits Tax on top of royalties - they will pay the new tax instead of royalties.  

 

So - only the biggest and wealthiest companies will pay on the very cream of profits. Less profitable ones will in fact pay less tax and the money comes back to Australians for key infrastructure like hospitals and roads. Your retirement payment from superannuation is made secure by returning money from foreign companies making the top levels of profits from resources YOU own in the first place. Sounds pretty fair - so what’s the fuss about?

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Comments

Thu 10 Jun 10  |  Tricia Dean
I am horrified to read that the LHMU is against the Resource Super Profits Tax. I find it hard to believe that you could think this would somehow be better for the country. One of the handful of countries to successfully sail through the GFC (thanks of course to the huge coffers of money the Howard Government left for the irresponsible Rudd to squander) was in no small part due to the mining industry.
This issue could be the one that forces me to resign from the union.
Use the analogy that I heard recently....'the Govt increases the tax on cigarettes and tobacco products to discourge smokers and yet doesn't believe doing the same to the Mining Industry would have the same effect'...... shame on you for your shortsightedness. Surely you can see the threat to so many union members jobs. The flow on effect through the building, hospitality, banking, administration, retail etc etc will be devastating to this country.

Thu 10 Jun 10  |  Scott Zackeresen
Tricia it’s great that you’re following this issue, but I just can’t see how resignation is a fix to anything.

Let’s set aside the stuff about us weathering the GFC - Howard’s coffers were courtesy of the resources boom and by not spending on infrastructure. The Rudd Government’s action was internationally recognised as having safeguarded the Australian economy from the full effect of the GFC.

Instead let’s consider some information I found in my research:

Workers and their families will benefit from an increase in their superannuation from 9 to 12 per cent and small business will pay less tax – dropping from 30 per cent to 28 per cent and a $5000 tax break.

Business leaders are starting to back down from their self-interested hysteria (do we really think Rio Tinto is interested in the well being of our community?). Here’s some recent quotes:
“Well basically, what that’s going to do is lighten the tax burden on the less profitable projects. It will actually spread the base around which effective investment can take place. This is actually an incentive to the sector, not a detriment.”
DAVID BUCKINGHAM – EX CEO MINERALS COUNCIL

In an interview on May 3rd Heather Ridout (CEO of a major Employer group, AIG, and no friend of workers) argued it was a positive step:
HEATHER RIDOUT:”... the weight of expert opinion seems to be in support of this type of tax. The EconTech research, which can line up against Access, indicates that investment jobs and output will grow in the long term under a tax like this. You'll see marginal mines stay open for longer, new ones open up.”

That same day the Commonwealth Bank stated : “The Government’s reforms will encourage further expansion in the capital intensive resources sector. Firms in other sectors of the economy will also be incentivised to undertake additional investments through reductions in the corporate tax rate. Australia’s economy will benefit from increased investment.”

June 7th, mining magnate and LNP financier Clive Palmer admitted his earlier claims he’d have to close projects were ‘exaggerated’.

Remember, it’s not a blanket 40% tax on the operation of a mine. It’s not even automatically 40% on ANY profit a mine makes. It is a graduated tax, so some mines will pay nothing, and any mine that gets into the threshold of 40% has to be making BILLIONS of dollars. That money in turn goes into infrastructure for Australia, and makes superannuation stronger for Australians to have a secure future.

Thu 10 Jun 10  |  Tricia Dean
If you have done your homework; as I'm sure you have, you would also know that mining companies who record losses (under this new legislation) can make a claim to the Federal Government for a reimbursement of some of that loss. One only has to think about the recent closure of Ravensthorpe and the BHP Brickette plant to the tune of many $ Billions LOSS to know that this current Government never intends to return any of that loss to the companies concerned. A better system would be to increase the Resource Profits Tax to a more realisic figure and then have that money directly spent in the state which earned that income.. eg a fully (mining industry funded) public hospital in Regional WA. Not just another grab by Canberra from the richer, less populated states to prop up the gross mismanagement of the others.

Tue 15 Jun 10  |  Scott Zackeresen
Interesting points, Tricia. You’ve certainly made up your mind!

Firstly, note the States will KEEP the royalties, but the companies get that amounted rebated from the Commonwealth. So ‘earning’ States won’t be out of pocket, and neither will be the companies.

An analysis by global energy consultant Wood Mackenzie says the coal miners are still expected to earn more than $80 billion over that period. Modelling found that with the tax, coal miners' earnings between July 2012 and 2016 would slide from $97.1 billion under the current regime to a measly $82.3 billion!

The most recent report issued by the Citi Investment Bank predicts a massive surge in resource company windfall profits and shows how they would be affected by the proposed super-profits tax:

BHP Billiton’s profit is set to go from US$10.7 billion in 2009 to US$23.5 billion in 2011. After claiming all its tax write-downs, including the royalty payments rebate, BHP Billiton will only pay 8% more on this surging profit with the proposed new tax on super-profits. Rio Tinto’s profit is predicted to rise from US$6.3 billion in 2009 to US$15.7 billion in 2011. The new proposed super-profits tax will only see Rio Tinto’s share of this drop by around 5%-15% of these windfall earnings.

Within weeks of the proposed super-profits tax being announced, a consortium of 11 coal mining operators, including BHP Billiton, Rio Tinto and Xstrata, were part of a $4.85 billion bid for Queensland’s coal rail assets. Hardly a vote of no-confidence in the future of the industry under the new super-profits tax.

Bear in mind that these super-profits are the result of a booming market which none of the mining companies have done anything to create. They just happen to be digging out the resources that belong to the Australian people at a time when prices for these commodities are doubling, tripling and surging by even greater amounts.

In opposing the tax, miners have argued it will "kill the goose that's laying the golden egg" because weaker investment would undermine a key export.

Wood Mackenzie's lead coal analyst for Australasia, Ben Willacy, said "Most of the projects that were profitable before RSPT are still likely to go ahead," he said. "Australia will still remain a competitive supplier and producer of coal. So I don't expect those production and export volumes to tail off significantly."

Finally, note that other countries are doing the same. In Norway, the super-profit tax stands at 78% and the multinationals there pay it.

Chile has proposed a new mining tax that would add to the $12 billion mining companies will pay in taxes to Chile’s government this year. Chile is the world’s largest producer of copper and mining companies such as BHP, Rio, Xstrata and Anglo plan to invest $48 billion in Chile through to 2017. In the past few weeks Brazil, the world’s top iron ore producer, is also planning to take a greater share from its rich mining industry while India is proposing a windfall profits tax on non-fuel resources, such as iron ore.

Sun 27 Jun 10  |  Christine Jennings
It has been interesting to read this discussion regarding the RSPT. I know absolutely nothing about how mining taxes work or who gets what, when and where.

It is hard to find unbiased reports when Governments decided to introduce new reforms.

It would be good to have web pages posted where additional information could be found so interested persons could make informed decisions.

I find it sad that Tricia has decided to resign from the Union because of this.

Our Union is much more than a decision to support one particular Government reform.

Our Union supports many people in the community. I dont necessarily agree with everything the Union does, but I look at the Union as a whole and the good work that it does for the industry I work in which is Aged Care.

I look forward to more information.

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