From "Super Tax" to super spin.

As soon as the Rudd government announced plans to implement a 40% super profits tax, the big mining companies automatically opposed such a plan. And why wouldn't they? The more money they make, the better the Australian economy is, right? Or as with all profit driven businesses, they do it for personal reasons, with altruism long forgotten. The 40% super profits tax is a tax long overdue. While the Australian mining sector is critical sector within our economy, maintaining its longevity and retaining benefits for all Australians, not just those who are employed by Rio Tinto or BHP, is critical. 

While the Henry Tax review didn't explicitly make the recommendation to implement such a tax, it does endorse it. With economic modeling demonstrating that there will still be, continued foreign and national investment into mining and resource ventures within Australia, this demonstrates that this new tax is not going to destroy the whole Australian economy, as some would have you believe.

The main question within the debate over the tax, which has been softly put by the government and not 'spun' enough in comparison to the oppositions "big new tax" catchphrase, is the question about the ownership of these resources. While the major, international conglomerate companies such as Rio Tinto and BHP find the resources, the owners of these resources is still the Commonwealth, thus 'public property', owned by the Australian people. The government, representing the views and values of the majority of the population, decide which way to disperse these precious resources. A company who finds resources, whether coal, gold, oil (even trees), can't start digging until it's granted government permission through license. So the Rudd government has the full capacity to stop particular mining ventures, and/or impose whatever conditions they believe necessary upon them. This includes environmental conditions, to taxation on profits. It is done to make sure the financial benefits of these resources, are spread amongst the Australian people equally. So while these companies are running campaigns about how they already do so much for the Australian economy, under this tax, they will be doing more.

Though one of the most asserted comments, coming from both the floundering Abbott opposition and cashed up resource industry, is the asserted statement that investment within Australia will stop. But unless the mines and resources magically float overseas, how can this be possible? Companies want to mine in Australia, not because they like our working ours, red sand or ultimately, even our tax rate; it's because we have the resources in quantities that no other country has. In both coal, uranium, aluminum, natural gas, gold and diamonds, we are almost world leaders for the amount of resources we have. And when the notion of Australia becoming less "internationally competitive" arrises, I encourage you to laugh. This is a "super profits tax", not a normal tax that takes a percentage cut out of every dollar earned. This takes a cut not out of the final profits that are made, but the absurd multi million/billion dollar profits that are made. These companies will already be making multi million dollar profits, so the incentive for them to continue investing and digging up resources within Australia are still there.

Though lastly, and on a point of politics, the opposition claiming that this is just a "cash grab" for a Government heavily in debt is just ludicrous. The IMF supports the mining tax, on the basis that it believes such measures will help prevent Australia slipping into recession if the world economy turns sour again. But the Rudd government isn't going to be sending you the money from the tax, directly in the mail, or spending it on a dodgy insulation scheme, but instead will be co-contributing it to your super. This will assist Australia's long term economic growth by allowing more people to be less reliant on the government for pensions. And then there's the added bonus of having more savings and investment within the Australian economy, though superannuation investments.

So while the Rudd government hasn't spun this new "super tax" to make it a completely 'won' political issue for them, all independent economic modeling and investigation has highlighted that this super profits tax will have a positive effect on the Australian mining sector, which is still be one of the most heavily subsidies industries within Australia. While the industry is obviously worried about missing out on a few extra million from their multi billion dollar profits, they are going overboard in their response, claiming that they are 'reviewing' projects within Australian and spending hundreds of thousands of dollars on advertising campaigns. They're spinning themselves and the Australian people, into a pointless frenzy. Hopefully the Rudd government wont' let this policy slide into oblivion, outdone by selfish groups prepared to shout "big new tax" and "economic Armageddon", despite facts being otherwise.


Links:
Growing rich pains: the downside to mining boom - National Times

Rudd's resources super profits tax will hit food: Tony Abbott - The Australian 

Resources tax - cracks widen - The Australian Business

Wayne Swan sells mining tax to states amid marginal seats risk - The Australian 

Miners reject the Resource Super Profits tax grab - The Age Business Day

40% of minerals go to the nation - The Age