Both sides of the Resource Super Profits Tax argument

Andrew Pegler – 14 May 2010

The RSPT has split the electorate and there are good arguments on both sides. Read on for the plain English version.

How does it work?

Once the RSPT kicks off on 1 July 2012 mining companies won’t get taxed on the first 6% of their profits and for the first five years will be allowed to depreciate assets a lot faster than normal. The federal government will also refund the royalties miners now pay to states and reduce company tax from 30% to 28%. But here’s the rub. All profit over 6% gets hit by a 40% RSPT and what’s left is taxed again at 28%. That’s a total tax of about 58%.

Nup

The head of Fortescue Metals calls it “nationalisation of the mining industry”. Tony Abbott reckons its economic vandalism and the-man-who-would-be-Malcolm described it as “the slightly better than thoroughly anaemic profits tax”. Here’s a list of grievances:

  • The minerals resources industry paid $80 billion in taxes and royalties in the past decade. The resources sector pays Australia’s highest tax rate. That’s a fair share.
  • The uncertainty is killin’ us! Banks are telling miners not to bother asking for money until the tax is better understood, which, depending when the election is held, could be another six months. That means delays to over $100 billion worth of projects and an army of engineers and geologists sacked or forced to work part-time.
  • Peter Costello has stepped up to the lectern with a withering spray saying the mining sector is a huge tax payer for the Australian economy and that the RSPT sends the wrong signal to international investors. But his most potent point is that many Australians will suffer because mining company shares have taken a hammering and so much super is invested there.
  • Starting a mining business from exploration to production is high risk and capital-intensive and takes several years during which commodity prices can fluctuate wildly. If we tax away the rewards for taking big risks it could send investment overseas.

Yep

Right now we are in Resources Boom Mark II so it’s entirely appropriate that the government takes money from the big end of town to pay off the national debt we racked up in the GFC. Plus the big miners are overseas owned so we need to keep more of that money in Oz. Here are some other reasons why we should introduce an RSPT.

  • We all deserve a slice of the pie. After all that’s our dirt too ya know!
  • It’s set to be very profitable for the Budget’s bottom line. Revenue: $12 billion by 2013-2014. And we need every red cent we can throw at the deficit.
  • Unlike the present archaic and unfair royalties regime, the RSPT is profits-based so when companies are more profitable the Australian people get more return. Conversely, when profits are lower companies pay less so it’s fairer on them.
  • Over the last 30-odd years we’ve heard mineral companies repeatedly threaten to pack up their bat and ball and go home when things haven’t gone their way from land rights to union rules to environmental legislation. So, while this kind of outrage is expected, all the projections are that profitability of mining, even with a RSPT, will continue.

Well that’s enough from me, what do you lot think?