The gloves are off in the battle between the people and the mining magnates.
Today Swan admitted the 40% Resource Super Profit tax is not set in stone. This was code for ‘come buy me a coffee and let’s see what we can do about it’.
“We’ve outlined the design of the tax, we’ve said within the design of the tax we’re happy to sit down and talk about all of the transitional arrangements.”
With state royalties still to be paid, the Fed – State tradeoff in moving to one resource rent system will in the meantime see some churning in the tax refunds miners in participating states will endure. This opens the negotiating door for the miners.
But will the RSPT tax the miners out of existence?
It can’t possibly do this because the RSPT is based on profits. This allows mining companies and their CEO’s to maintain their bonuses. This deftly meets the ‘political’ in political economy.
With the growth in mining investment in W.A (a royalty rate of 7%) versus S.Australia’s 3.5%, there has been little discernible difference. The higher royalty rate hasn’t scared off investment. Why? Because miners understand their business is much more profitable than mass manufacturing of cars for example.
Scarcity dominates this decision. Natural resources are scarce and so with a Chinese led boom, miners are sure to profit. An RSPT is a way to re-balance the advantage mining companies have with their scarce resource versus car manufacturers, who produce a non-scarce resource.
Regarding China, a Resource Rents system is an assertion of sovereignty (now tagged ‘sovereign risk’ for mining investors). Kevin Rudd reminds us of our sovereignty here: talking up the value of our common-wealth (if only he remembered who his seat is named after and why):
Prime Minister Kevin Rudd said the redistribution of wealth was justified and long overdue, adding that much of the income generated by mining the resources which were owned by the Australian people went offshore.
“Over the last decade the mining companies generated $80 billion in higher profits. At the same time, governments on behalf of the Australian people, received only an additional $9 billion,” Mr Rudd told ABC Radio.
“BHP is 40 per cent foreign owned, Rio Tinto is more than 70 per cent foreign owned. That means these massively increased profits … built on Australian resources are mostly, in fact going overseas.”
Dear Mr Magnate, please note the term Commonwealth!