Last month, the Green Party called for a National Resources Fund and a big new tax on mining, hot on the heels of the Henry Tax Review’s recommendations to hit mining companies with a 40 per cent resources rent tax.
The new tax, the Henry Tax Review said, should replace state based tax regimes.
But despite protestations from mining lobbyists towards the Review’s proposals, Greens Leader Bob Brown upped the proposed tax from 40 per cent to 50 per cent.
He wants the money to go into a fund to support Australians when times aren’t as good financially, as well as helping to fund all round ‘greener’ projects.
Currently, the Greens say, mining companies are hugely subsidised with only seven per cent of the $100bn value of Australia’s mineral resources heading back into state and federal coffers.
Industry baulks at Henry Tax Review
At the time of the Herny Tax Review’s recommendations (the final draft ihas been held back until May 2nd, much to the consternation of all industries who feature in it ) the resources industry was quick to attack the 40 per cent resources rent tax proposal to replace state royalties.
Reports said the 40 per cent slug would be modeled on petroleum resource rent tax, currently levied on products such as crude oil and natural gas mined in Commonwealth waters – with the exception of the North West Shelf and the area of joint development between Australia and East Timor.
Queensland and Western Australia were unimpressed at proposals which some analysts suggested could see earnings in the iron ore industry being cut by up to a quarter.
There is a long history of the mining industry having its say, and this time was no different.
“”I can assure you that the MCA, along with other groups representing mining, will be offering their services and contributions to the Government if any debate ensues,” Ian Smith, chair of the Minerals Council of Australia – the powerful industry lobby group.
But the proposals in the review only suggest levying the tax after exploration and development costs were paid for, and only in years when the project made a profit.
He stressed that it was in the benefit of Australian taxpayers, explaining that company tax partly taxed ”profits extracted by foreigners from Australia’s natural and immobile resource endowments.”
Calls for taxpayer-value from foreign mining giants
Despite their iconic status in Australia, BHP, Rio Tinto, Anglo and Xstrata, are all majority foreign-owned. And Bob Brown wants much of the money which is currently going into the pockets of foreign shareholders to go be put away for a rainy day.
Treasury official David Parker has previously also said that Australians ”expect(s) and should expect to receive a fair return from its natural resources.”
And so it is Scandinavia the Greens are looking towards. Norway, a world leader in managing the income from resource exploitation, set up a sovereign fund when it underwent a North Sea oil boom in the 1970s, in turn avoiding falling foul of the problems associated with developing countries and the poor management of resource revenue.
The Greens stress that the Norwegian model has so far netted $450bn – significant, in a country of less than five million people.
A resource rent tax, meanwhile, would raise between $5 billion and $10 billion each year in a boom period, they say.
Australia’s soaring dollar and potential looming economic problems (economists speak of a ‘resource curse) can in many ways be brought back to the strength of our mining exports, and by virtue of Tuesday’s announcement, the Greens are giving backing to calls of shortsightedness on behalf of federal and state governments.
“A growing and ageing population means we need to plan now how we are going to generate revenue into the next 100 years, not just the next ten years”, Brown said, eyeing the potential of large mining companies to maintain the comfortable standard of living enjoyed in Australia.
Meanwhile, the country awaits the Henry Review on May 2, and more importantly, Canberra’s response.