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Issue #1459      16 June 2010

a real super-profits tax

Workers support the concept of the resource sector paying more out of its stupendous profits to support the needs of the society whose natural wealth is being exploited. After all, it is the non-renewable resources of the country that are being loaded aboard huge ships and sent overseas along with the bulk of the profits from the mining industry. But the Rudd government’s “resource rent tax” is not primarily about getting transnationals to pay a more just portion of the profits of this irreplaceable wealth into the public coffers.

Much of the claim and counter-claim in the duel of ad campaigns is not over whether or not to “reform” the sector’s tax regime along the proposed lines but part of the predicted haggling as the mining corporations battle to get the sweetest deal possible at the community’s expense.

Projects are not on hold, jobs are not at risk and super funds are not taking a hit as a result of the proposed super profits. This is becoming clearer as the days go by and the economic bullyboys are forced to come clean. Gold Coast mining magnate Clive Palmer admitted on the ABC’s Four Corners program that he had “exaggerated” when he claimed he had put on hold a project set to employ 3,000 people and generate about $2 billion in export earnings.

Anglo-Swiss mining corporation Xstrata signed a contract with another company to manage copper tailings at the Ernest Henry mine the same day it said it was “suspending” operations at the Queensland project. The “resource super-profits tax” (RSPT) was given as the reason. The company is still buying up farmland in the area of its Wandoan mining lease.

Calling their bluff

The Australian Securities and Investments Commission (ASIC) has called the bluff of a number of the corporations making the threats. Commissioner Belinda Gibson pointed out that they have not informed ASIC or shareholders that projects have been suspended or cancelled as required by law. It is investigating this matter. Some may be in breach of the legislation. Others will be exposed as having been a bit too vigorous in joining in the debate around the super-profits tax.

Some seemingly independent bodies, even government agencies, have weighed into the battle with their verdict. Infrastructure Australia has warned that the super-profits tax (or at least in its current form) will harm the country’s economic prospects. It should be noted that Infrastructure Australia’s chairman is Rod Eddington who holds down many corporate positions including as a director of mining group, Rio Tinto.

Other industry bodies are telling a different story. The mining industry’s media campaign claims workers’ retirement savings will be stripped as superannuation funds suffer reduced returns on investment. The Association of Superannuation Funds of Australia, which represents about 80 percent of funds in the country, said last week that the super profits tax might cause a dip of less than one percent to members’ returns. “The sky is not about to fall in,” chief executive Pauline Vamos noted.

The Rudd government’s super profits tax is part of a package, which includes the much-discussed 40 percent impost and which is generous to the mining industry. It did not come “out of left field”; it is not a break with the overall neo-liberal policy direction of the Rudd government. It is part of the Henry Tax Review which is a thoroughly researched piece of work, a blueprint for future neo-liberal governments (whether Labor or Coalition) to reduce company taxes and personal income tax overall and shift the emphasis to non-progressive indirect taxes. Big business, including the mining industry, was not only “consulted” in its formulation; it was its source and inspiration.

A vital debate

While it is not designed to take big chunks out of mining corporation profits, the RSPT has opened up a very useful public debate in Australia. Who owns the mineral resources of the country? Who owns the land? How should the exploitation of the resources be taxed? If the current mining licence holders will not work these resources, what should be done? The mining industry has had its say. The government agrees with them in principle but is arguing the detail. It is time the workers of the country had their say.

If we are concerned, as we should be, that a brake has to be available to control the extraction of non-renewable resources of the country then royalties must play a greater role, not a reduced one. They are levied on the volume of the resources removed, not just on whether this corporation or that one shows a profit on their carefully crafted books. Rudd’s RSPT is the first major step in removing royalties altogether.

If corporations are not prepared to pay taxes and royalties levied by governments acting in the people’s interests, including a genuine super-profits tax, then those companies should make way for players that will. The best option by far, the only way to ensure the full value of our resource wealth will flow to the community, would be to ignore the smokescreen thrown up by the mining corporations and nationalise the resource sector. Sooner or later, that must become the demand of the labour movement in Australia. Let’s make it sooner.  

Sweeteners for the “super profits” tax – yet mining corporations want more!

  • The tax becomes a grant if projects aren’t profitable
  • $300,000 cash back for every dollar $1m spent on exploration
  • Infrastructure from a $22 billion federal fund
  • Commonwealth pays state resource royalties for the corporations
  • Fast-tracked depreciation and other incentives stay
  • Tax rate on company profits reduced from 30% to 28% over two years and a medium term target of 25%

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