A symbol of the Gillard Government’s astonishing ineptitude - a tax which drove away investment without actually raising much money:
Yet another policy failure that was the hallmark of the Rudd/Gillard/Rudd Labor/Green govt
THE mining tax that was originally forecast to produce $4 billion in revenue this financial year has..., despite Rio Tinto, BHP Billiton and Fortescue Metals Group posting collective profits of more than $US14 billion from their West Australian iron ore mines.
The mining tax that was originally forecast to produce $4 billion in revenue this financial year has raised just $232 million, despite Rio Tinto, BHP Billiton and Fortescue Metals Group posting collective profits of more than $US14 billion from their West Australian iron ore mines.
As Tony Abbott prepares for a fresh Senate election campaign in Western Australia centred on his attempt to repeal the mining and carbon imposts, an analysis by The Weekend Australian shows the tax has failed to raise revenue even though the profits of the three big iron ore miners soared by 81 per cent and the price of the commodity rose to more than $US130 a tonne.
The miners made combined half-year profits of $US14.58bn, compared with $US8.04bn a year earlier, a period in which the iron ore price crashed to as low as $US87 a tonne.
However, BHP was the only big iron ore miner to pay the minerals resource rent tax in the six months to December 31.
The Coalition is likely to win the support of enough crossbench votes to repeal Labor’s MRRT in the new Senate, which begins sitting after July 1.
The Palmer United Party, Democratic Labour Party, Liberal Democratic Party and Family First all support scrapping the tax on iron ore and coal
The outcome is subject to the results of the Senate election re-run on April 5.
A spokeswoman for Joe Hockey said yesterday the tax should be abolished because it had destroyed jobs and business investment, particularly in Western Australia, while generating sovereign risk issues.
Rio Tinto, BHP Billion and coalminer Xstrata rapidly negotiated the MRRT with Julia Gillard and Wayne Swan in the wake of the 2010 coup that removed Kevin Rudd as prime minister.
When the legislation was enacted in 2011, Mr Swan, then treasurer, forecast that the MRRT would raise $4bn in 2013-14 and he committed the windfall to superannuation reforms, corporate tax cuts, small-business benefits and regional infrastructure funding.
The forecast revenue has been gradually whittled down and the Abbott government, which has pledged to abolish the tax, now expects it to raise only $500m this year.
Analysts have long doubted whether the original forecasts were realistic given that Mr Swan allowed the big miners to price their assets using today’s inflated market values and then claim massive annual deductions under the MRRT regime.
The failure of the MRRT to raise significant revenue, even at a time of healthy profits and high iron ore prices, undermines Mr Swan’s repeated claims that the tax would eventually be a success.
“MRRT is a profits-based tax that raises more revenue when profits are higher and less when they are lower,” he said in February last year, when it was revealed that the tax had raised just $126m in its first six months.
The failure of the MRRT also appears to contradict Rio Tinto chief executive Sam Walsh’s comments last year that it would start to raise revenue when prices rose.
“It (the MRRT) is basically working as it was intended, it was designed as a tax on super profits,” Mr Walsh said. “We’ve seen that iron ore prices have reduced and that, as a consequence of that, we’re not seeing a great triggering of the mining tax.”
The analysis by The Weekend Australian shows earnings from Rio’s iron ore operations soared by 80 per cent to $US6.38bn in the first half of 2013-14, yet it still did not pay any MRRT. BHP made $US6.5bn in profit from its iron ore business in the half-year — up 60 per cent from the $4.06bn it made in the corresponding period a year earlier.
In its half-year accounts released last month, BHP said it “expensed” $US29m of MRRT.
A spokeswoman said this did not represent a specific payment.
Fortescue almost tripled its iron ore profits to $US1.7bn but still did not pay any MRRT.
Minerals Council of Australia chief executive Brendan Pearson defended the design of the MRRT, saying it was intended to collect additional revenues only at the peak of the commodity cycle. But he said the MRRT was never needed for Australians to share in the boom’s benefits and investor confidence would be enhanced if parliament abolished it.
“The industry paid a high and stable industry tax ratio averaging 41.3 per cent between 1999-2000 (and) 2011-12 — prior to the introduction of the MRRT,” Mr Pearson said. “Total revenue from state royalties and mining company tax has been in excess of $130bn since 1999-2000.”
The Treasurer’s spokeswoman said the MRRT had raised about $400m since its inception in July 2012 and the Coalition wanted to abolish it.
Mr Rudd declined to comment yesterday and Mr Swan could not be reached
http://www.theaustralian.com.au/national-affairs/policy/tiny-take-sounds-mrrts-swansong/story-fn59ns...
