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It’s easy to be filthy rich when you don’t pay tax

Jessica Irvine

by Jessica Irvine

29 Oct 09:30am

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Filed under: Bhp, Marius Kloppers, Mining, Tax

85 comments

A TAX that doesn’t raise a cent?

Revenue raised by the mining tax in its first three months: $0. Photo: Herald Sun

The sorry saga of the mining tax continues after revelations that Australia’s big three miners - BHP Billiton, Rio Tinto and Xstrata - paid not a single cent in the first three months of this financial year.

No one emerges as a winner in this political stoush; not Wayne Swan, not Joe Hockey and definitely not taxpayers, the ultimate owners of the nation’s precious mining resources.

Before the price bonanza, miners too had been calling for reform of state royalties, pointing out that a fixed tax on volumes was unfair when prices were low.

Of course, they weren’t so bothered when prices skyrocketed.

And so it was in May 2010, when, amid a resurgent commodity price boom, Kevin Rudd announced a resource super profit tax admittedly after failing to consult with industry and with significant drawbacks in its design.

Miners fought back, launching one of the most audacious con jobs ever on the Australian public, spending $22 million on advertising claiming the mining tax would destroy jobs and investment.

It was the nail in the coffin of Kevin Rudd’s prime ministership and Julia Gillard came to power, immediately agreeing to massive concessions on the mining tax.

The original mining tax was supposed to apply at a rate of 40 per cent on profits above a certain level.

This headline rate was cut to 30 per cent, plus a generous new deduction for the “value added” by miners in the mining process, which took the effective rate of the tax down to 22.5 per cent.

There were other costly concessions: A more generous starting base for deductions and rebates for all state royalty increases.

Estimates of the tax to be raised were dramatically scaled down by about $60 billion over 10 years.

So taxpayers have a right to be concerned the tax is now raising zilch.

It could have raised so much more over the long term if a lily-livered Government hadn’t backed down to bully boy - and girl - miners threatening to take their bat and ball and play offshore.

But in taking up the cudgels against the tax’s lack of revenue, the shadow treasurer, Joe Hockey, is being disingenuous.

If Hockey had his way, the tax would never raise a cent, the Opposition having vowed to scrap the mining tax but keep massive spending promises attached to it.

And it was the Opposition that joined forces with the miners against a “great big new tax”.

Because, for all its intricacy, the mining tax is still a good idea.

Applying on profits above a certain level, it captures a bigger slice of the action in good times for the ultimate owners of the commodities - the Australian people - while also sheltering mining companies from tax when times are not so good.

As taxes go, it is an efficient one.

But it is hard to quantify and prone to sharp swings in commodity prices.

As any business person knows, profits depend crucially on incoming revenue.

Mining revenue took a hammering in the September quarter as iron ore prices slumped from about $US140 a tonne to about $US85 a tonne.

They have since come back up to about $US120 a tonne.

Usually when commodity prices fall, so too does the dollar, as the prospects for the economy look less rosy.

But the Australian dollar has remained stubbornly high, above $US1, and this has hurt mining profits too.

As a quirk of international finance, commodity export contracts tend to be written in US dollars.

When the dollar is high and Australian mining companies go to exchange their US dollar profits into Australian dollars they lose out. It is a direct hit to their bottom line.

This combined revenue hit meant mining companies haven’t hit the profit level needed to trigger the mining tax.

Of course, the Government’s concessions mean this trigger point is now much higher than it might have been.

It could all change quickly. If iron ore prices returned to $US140 or more a tonne, the tax could soon be reaping billions of dollars of revenue.

But this, in turn, depends on many variables: China’s capacity for growth; the enduring euro crisis; the US elections; you name it.

As Frank Drenth, the executive director of the Corporate Tax Association, put it: “The mining tax is like a box of chocolates, you never know just what you’re going to get.”

The numbers

$0: Revenue raised by the mining tax in its first three months.

$2 billion: What Treasury expects the mining tax to raise this financial year.

$9.1 billion: Treasury’s latest estimate of how much the mining tax will raise over four years.

$13.4 billion: What Treasury forecast in May the tax would raise over four years.

$5.3 billion: What forecasting group Macroeconomics expects the tax to raise over four years

$22.2 million: Cost of the mining industry’s anti-mining tax ad campaign.

$15.4 billion: BHP Billiton’s net profit last financial year, a 35 per cent drop due in part to falling commodity prices.

$US9.8 million: Marius Klopper’s pay last year, a drop of 16 per cent on the previous year.

Comments on this post close at 8pm AEST

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85 comments

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    • lower_case_andrew says:

      08:45am | 29/10/12

      Yay for quality journalism.

      Headline: “It’s easy to be filthy rich when you don’t pay tax”

      Really?  These companies haven’t paid any tax?  Are you really, really sure about that?

      Or, is it the case that some companies haven’t HAD to pay a SPECIFIC tax, due to pricing, output and general government incompetence?

      Reply

    • Fred says:

      09:04am | 29/10/12

      But the crux of the issue is that Swanny and dillard have been promising this rich vain of revenue from the tax that they have been busy pre-spending on our national credit card without having actually received a cent.

    • marley says:

      09:15am | 29/10/12

      Yeah, that was my thought. I’m pretty sure the miners are paying royalties, ordinary company tax, GST on everything they buy, etc etc etc.

    • lower_case_andrew says:

      09:22am | 29/10/12

      @Fred, I don’t doubt that anyone—apart from the usual Labor barnacles—will disagree with the idea that Labor have been hopeless on this entire issue.

      Swan simply isn’t competent, either as a politician or economic lever-puller.  Without factional backing, these people probably wouldn’t even have real jobs in the real world.

    • Gordon says:

      09:52am | 29/10/12

      agreed lca, I nearly choked on my weeties.They still pay royalties, they still pay company tax, their employees still pay income tax, and they will still pay MRRT when (if) the commodity prices get back to (so-called) super profit level.

    • Matt says:

      09:59am | 29/10/12

      If I recall correctly, the mining tax was going to be tougher under KRudd’s leadership.  Wayne Swan went behind his back and conspired with the big three corporations to come up with the current plan, that was obviously going to get easier support from the mining companies, and thus be used as political ammunition against KRudd.

    • Tim says:

      10:04am | 29/10/12

      Gordon,
      Good points.

      So the tax is working exactly as designed.

      Andrew,
      Yep Labor were stupid to fall for the Libs and mining companies scare campaign. The tax should have been implemented as outlined in the Henry review.

      Although its funny that the Libs who were whinging that this tax was a huge impost on business are now whinging that it isn’t earning any money. Sorry you can’t have it both ways.

    • PJ says:

      10:18am | 29/10/12

      Some 80 percent of the Energy consumed by the mines comes from Coal, so they would be paying the higher carbon tax bills too.

      Don’t forget under the Gillard Governments ‘entitlements for votes ’ strategy, lower and middle income families pay tax but get it refunded through the Family Benefits packages. It’s one of the reasons why Swan has put out 4 Budgets only to be totally wrong and blow them all. 

      ‘Vote for us or you’ll lose the freebies .’... It maybe anti democratic, but it works

    • Busted says:

      10:37am | 29/10/12

      PJ
      I see you are babbling on and making things up again as is your wont.

      Try telling that to the many many mines in the Pilbara which use natural gas.
      And for the mines in NSW and Qld? Guess if they are mining coal, they might as well use coal to generate their energy. After all, they get it for free. A little carbon tax (only if they emit enough) is a very small price to pay.
      but hey, you keep babbling on.

    • Dissident says:

      10:45am | 29/10/12

      Yep, these companies have paid plenty of tax - just not this crappy one. Despite my pleasure that the lack of profit has meant that the Commonwealth hasn’t ripped a red cent out of my State (WA), this is still a terrible tax. Just terrible.

      The fact is that the Constitution provides that States own the minerals. If anyone thinks that mining companies weren’t paying enough for the minerals they extracted, they should have simply written a letter to the state based Minister for Resources (equivalent) and said that they wanted an increase in Royalties. Then the States who owned the minerals would then be better able to afford things like Police and hospitals - also their responsibility under the Constitution. Instead we have a petty government, drunk on its own power, that thinks that slugging miners is going to make up for their blindingly incompetent financial management.

      The Commonwealth already pillages WA but gives very little back. Succession isn’t necessary (the rest of the Commonwealth stuck by WA when it was a backwater) but it would be nice if our leaders would read the basis for our existance as a Nation every once in a while.

      I doubt QLD, SA or WA would have joined in the first place if they had made it clear that joining the Federation would result in the loss of your key revenue stream (taxation rights) and dependance on Canberra based beaurocrats.

      Here’s hoping that the mining companies continue to find ways to cook the books (Wayne Swan can’t get indignant about that, he just did it) so that they manipulate their profit to be much lower and don’t ever pay this awful, awful tax.

    • I hate pies says:

      11:30am | 29/10/12

      Another misleading point/glaring error - royalties, certainly in coal, are paid on a rate for the average price per tonne sold multiplied by the tonnes sold - they are not a fixed volume tax. As prices go up, so do royalties.

    • TC says:

      11:34am | 29/10/12

      My thoughts exactly. Every time I read one of Miss Irvine’s pieces, the same thought pops into my head: ‘bimbo.’ How on earth she gets to write this twaddle on a national platfrom is mind-boggling.

    • TrueOz says:

      11:43am | 29/10/12

      It’s the sort of thing that tends to happen when you handball the Treasury portfolio to an economic illiterate (not to mention an apparent imbecile).

    • Tubesteak says:

      12:14pm | 29/10/12

      A lot of valied points in this thread. Means there is very little left to say…..unfortunately

      Soooooo how ‘bout that local sports team?

    • Joey says:

      12:57pm | 29/10/12

      Jessica, are you on drugs or just don’t know what you are writing about. I understand Abbott to spin ,but you need to go back to school.

    • Esteban says:

      01:09pm | 29/10/12

      Dissedent. When WA was a backwater it was funded by London not the Eastern states.

    • darren says:

      08:52am | 29/10/12

      The number you missed : the billions that gov’t has already spent assuming that the mining tax would bring in the bacon. Where’s that money coming from now?

      Reply

    • acotrel says:

      08:57am | 29/10/12

      Perhaps you personally will get a job and pay some tax ?

    • scubasteve says:

      10:59am | 29/10/12

      Wayne and Julia came out of that meeting room with Big mining grinning like cheshire cats. Did anyone here actually think that these two idiots could outsmart the CEO’s of these companies?  Mr Kloppers $9.8 million salary is well deserved. He personally saved the company from paying Billions in tax.
      Kloppers for PM.

    • bananabender56 says:

      08:54am | 29/10/12

      So who really cares if the miners don’t pay company tax? They pay royalties and the amount of tax generated by payroll and GST is huge. The bigger question should be why is the government raising taxes when they have been shown to be woeful at managing the tax revenue they currently reap. Who also really cares what Marius Kloppers earns - you’re only paid what your employer can get away with. NO employer pays you more than they have to. If his pay was divided up amongst all Australians we would get 43 cents each. The government is budgeting $20M for NBN advertising (with no competition) so what does showing the $22.2M anti tax advertising budget really prove?

      Reply

    • acotrel says:

      09:17am | 29/10/12

      When the miners pay royalties, particular states benefit more than others. Some of those states have been supported for many decades by those who are missing out when all the taxes are not based on a federal tax.

    • Kipling says:

      09:17am | 29/10/12

      The $22.2 mil may well give some indication of what mining companies will apply for as an expense to reduce taxable income….

    • bananabender56 says:

      09:34am | 29/10/12

      @acotrel, so what percentage of a mining companies outgoings are related to payroll and payroll related costs, payments to third party suppliers etc etc. I would suggest that the taxes generated by those activities flow back into the Federal Govt. Still doesn’t answer the question of why raise taxes when you can’t properly manage the tax you already have. (or maybe giving money to Indonesia for schools, money to Liberia, money to PNG, money for a UN security council etc is money well spent?)

    • jhamiltonwa says:

      09:37am | 29/10/12

      Relax, acotrel, Western Australia had paid back in full the excess funding it received over many decades by the end of the eighties. You’ve been bludging on the teet ever since, not that there is anything wrong with that, much.

    • acotrel says:

      10:01am | 29/10/12

      @jh
      Is WA about to secede and form it’s own defence force ? When the mining boom ends WA won’t be back dependent on other states ?  We live in a commonwealth ! The states should not even exist as entities !  All we really need is the commonwealth government and local councils.

    • gnome says:

      10:02am | 29/10/12

      Where would you get the idea the miners don’t pay company tax?  Of course they do.  They pay all the normal taxes any company pays.

    • bananabender56 says:

      10:44am | 29/10/12

      @gnome, you are of course correct - it should have been MRRT

    • TC says:

      11:47am | 29/10/12

      Alcotrel, as a West Australian who can see my state constantly getting screwed by Canberra and the ‘only States that matter’ on the East Coast I will take up arms before WA loses its state government. Anybody who has dealt with Canberra public servants loathes them. WA needs to develop and we have infrastructure projects to fund due to mining, we also have a massive land mass that requires infrastructure and maintenance. This stripping of money from WA to give to bludging states like Tasmania is going to hold the whole country back.

    • M. Mouse says:

      12:10pm | 29/10/12

      Acotrel, I look forward to seeing your new Consitution. Personally I think it is the Commonwealth Government we could do without.

      Meanwhile my husband works for Rio Tinto and I can assure you he pays plenty of tax. If it wasn’t for the “Greedy miners” we would be struggling on a Commonwealth DFRDB pension unable to make ends meet.

    • Dissident says:

      12:21pm | 29/10/12

      Hey acotrel, WA is strong enough to stand on its own. Even before the recent mining boom, WA was still sending an excess of over 1bn a year to the Commonwealth that was not returned in grants or payments of other kinds.

      Having said that, I would prefer that WA stayed in the Federation. I used to be a fervent seccessionist, but then I remembered that politicians are wankers no matter what ilk they are. I would prefer to be angry at a New South Welshman or Victorian than a Western Australian. Also its great playing footy and cricket against you guys.

      It would be nice, however, if we reverted back to what our Founding Fathers intended and largely have autonomous States in control of all their funding of the day to day stuff, and then kicking a certain amount to the Feds to do things that are better done collectively - like Defence and Foreign Affairs. Why we need a Federal Health department, for instance, is beyond me.

      WA doesn’t need to secede, but we do want to spend our own money on ourselves.

    • Fed Up says:

      08:58am | 29/10/12

      Just another example of Labor under Ju-liar Gillard coming up with a half assed policy they couldn’t prosecute properley.
      A tax that draws no revenue….sums up Labor.

      Reply

    • Economist says:

      09:25am | 29/10/12

      Agreed, I doubt the Liberals would have given so many concessions to the big three mining companies and allowed them to dictate policy/tax development. The original RSPT was a much better tax, that only went too far by not incorporating royalties into the tax calculation. In the end the MRRT did incorporate royalties and at much lower marginal tax rates. The MRRT is a basket case, whereas the RSPT would have supported smaller mining companies. The Minerals Council screwed over smaller miners.

      The fact is effective marginal tax rates by the miners are much lower than they should be. Royalties should be considered an input cost not a tax.

      PS I’ll never support Anna Meares because of her role in the mining companies advertising blitz.

    • AdamC says:

      09:45am | 29/10/12

      Economist, wasn’t the RSPT ultra complicated and based on questionable assumptions? I seem to recall that it involved a government rebate on loss-making, early stage developments that would not actually be paid out in cash at the time. However, Treasury boffins assumed that the miners running those projects would be able to borrow against these rebates at the risk-free rate, which seems very unlikely. Am I barking up the wrong tree there?

      What I do not really understand about any of this is, why do we really need a special tax on mining? We already have a ‘profits’ tax, which is relatively straightforward and paid as a proportion (30%) of company’s taxable earnings. Therefore, if miners’ profits increase, so does government revenue. The state is therefore already taking a share of the economic rents associated with extractive industries.

      If people feel like resources companies should pay a higher rate of tax than, say, banks (despite both enjoying economic rents) why not just impose a ‘mining supplement’ of, say, 5% of earnings when commodity prices go above a particular index level? Why create a complex, controversial tax regime on miners just to gain some incremental gravy revenue for a few years at the top of the cycle?

    • Tim says:

      10:09am | 29/10/12

      AdamC,
      Simply because the states own the product the companies are selling and royalties are inefficient in gaining proper returns for the minerals.

      Although I agree with Economist that The RSPT was a much better tax.

    • Another Reader says:

      10:20am | 29/10/12

      FFS, can we (by which I mean “you”) drop the ‘Ju-Liar’ BS. It’s as dumb as “HoWARd” was a few years ago.

    • PJ says:

      10:47am | 29/10/12

      The MRRT was poorly negotiated by the Gillard Government absolutely, no question.

      It may surprise you to know that Swan had omitted key players from the negotiation table in order to push through the type of tax the Gillard Government wanted.

      First off it really impacts new projects. So delays there straight away.

      The MRRT is 30 percent of the sale value at the mouth of the mine. Many companies sell the ore to their internal sales arms at this point. It is not the open market price. tongue laugh

      The MRRT is only paid once all the CAPEX costs are covered, which means a mine could be operational for 3 years before it pays MRRT. Lmfao!

      There is a clause that The mines can use to reduce the tax from 30 percent down to 22 percent. Ha ha are you receiving the message folks? grin

      Those of you that can read and read widely, I need you to recall:
      - Swan launched the MRRT payments into our Super etc saying it was monies from the MRRT.
      - Swan said he had over stated the contribution of the MRRT due to the complex way the mining industry works. In other words he realised we were about to find out it paid nothing so far.
      - Swan said although the contribution from MRRT is zero presently, during the financial year it would be $9 billion. He stated that twice to the press corp, who later found out it would be $2 billion at best. Fibs on Toast anyone?

      So Swan, so eager for votes, secured another huge loan against our name and doled it out as MRRT.

      Anyway not to worry. As Ferguson was announcing the end of the mining boom in Australia, the former key players in Australia were in Africa, setting themselves up there for future projects. Bloomberg reported African mining growth in 2012 from -16.8 to +32 percent, in two quarters.

      The MRRT and Carbon tax will never never deliver the original figures stated 4 blown budgets ago.

    • Economist says:

      11:45am | 29/10/12

      AdamC to be fair I’m not across the intricacies of the RSPT. While it was hard to explain the Treasury boffins and mining company accountants were across the detail and that is all that mattered.

      You may be right about the rebates, but I thought that this was to the benefit of the smaller miners and at the expense of larger miners. Dare I say that I agree with much of what Babylon has stated.

    • PJ says:

      05:48pm | 29/10/12

      Referring to the Government very own site to promote the MRRT. Here is what the Gillard Government promised you lot with the introduction of the MRRT:

      What would the mining tax mean for me?
      - the mining tax will see the average worker gain about $450 a year, due to the flow-on results of cuts in company tax and tax breaks for small businesses.
      - The overall cost of food would drop by 0.9%, clothing and footwear by 1.3%, housing by 1.1%, transportation by 1.7% and communication by 1.4%.
      - The inflation rate would drop by 1.1% which would, in turn, ease the pressure on interest rates and finally,
      - Australia’s gross domestic product (GDP) would rise by 0.7%.
      Also quoted in the Daily Telegraph.

      None of the above has manifested,

      Nor does it has too. Because once Australian voters let the ‘No Carbon tax’ lie go, it created a president that your happy being fed bull and there will be no consequences for doing so.

    • Jenny says:

      09:00am | 29/10/12

      “It was the nail in the coffin of Kevin Rudd’s prime ministership “, who are you trying to kid. The main nail was when Gillard and Swanny pressured him to drop the ETS. The question is did she push that issue to weaken Rudd’s position for her carefully prepare betrayal?

      Reply

    • Sam Scout says:

      09:03am | 29/10/12

      Jessica,

      If you know so much about tax why don’t you discuss the withholding tax reigme in this country that allows foreign banks to pay no tax on any interest income they earn (S128F 1936 ITAA Public offer test) or google, unilever, apple etc to pay next to no tax on their profits. (see tax treaties)

      You see BHP and RIO don’t pay a lower rate of tax because they are miners - they pay a lower rate of tax because they are multinationals and exploit the thin cap, transfer pricing and withholding tax rates available to them.

      Its just that because they are listed on the ASX their accounts have greater exposure to the general publc whereas multinationals with headquarters in other countries don’t have the same exposure that BHP and RIO.

      If you want a level playing field forget the mining tax and amend the withholding tax rates and crack down on transfer pricing.

      Reply

    • Tony of Poorakistan says:

      11:13am | 29/10/12

      Additionally, if you are going to impose a supertax on one sector, why not do it to all companies who earn the same sort of profit? Yes, I’m looking at you, ANZ. And NAB, Telstra etc etc

    • Blind Freddy says:

      01:31pm | 29/10/12

      @Tony of Poorakistan

      It has been explained endlessly everywhere - resources are finite and owned by the crown. Money is not a finite resource owned by the crown.

    • I always ask you for Coffee says:

      09:05am | 29/10/12

      Does one need to be filthy rich to ask you out? Coffee??

      Reply

    • Dave says:

      09:09am | 29/10/12

      Interesting the government advertising. $2000 to rent the kitchens in the first Carbon Dioxide tax, THEN they spend over$100,000 to make 2 kitchens in a studio, with new everything, only to put it in storage after the ad was film. Bet these moronic scum are also paying a hefty storage fee.

      Reply

    • Bris Jack says:

      09:18am | 29/10/12

      And she is supposed to be the best negotiator labor has.

      Reply

    • Steve Putnam says:

      05:07pm | 29/10/12

      Well she sure out-negotiated Abbott. Just ask the independents if you don’t believe me.

    • Chuckles says:

      09:20am | 29/10/12

      “The government is budgeting $20M for NBN advertising “

      This must be to counter the bullshit coming out of conservative mouths and illuminate the reality of the NBN. Conservative should just accept that the NBN is the right way forward and STFU.
      Continuing to talk down the very popular NBN is going to cost them votes and with the latest poll results, they can hardly afford that unless of course they want another term in opposition.

      Reply

    • Steve Putnam says:

      05:22pm | 29/10/12

      @ Chuckles Yeah, if Turnbull was serious about his “fibre to the node” claptrap he’d divest himself of his shares in French Telecom who are about to embark on their very own fibre optic system similar to the NBN.
      Money talks and bullshit walks.

    • Mahhrat says:

      09:21am | 29/10/12

      I’ve tried to look at it from a supply and demand scale.  What are we charging miners (in tax) to extract and on-sell the ores in the ground?

      Are we charging enough, given the market? 

      When the market is poor, are there things we should do to help improve the market?

      I’m reasonably certain that at $140 a tonne, we’re not charging enough for mining companies to extract the ore in the first place.

      At $85 a tonne, we can do work (if it’s needed) to protect the industry on the proviso that the prices will improve.

      I don’t see it as needing to be more complicated than that.

      Reply

    • tez says:

      10:54am | 29/10/12

      In your thinking have you considered the billions of dollars in direct subsidies the government provides to large mining companies. .

    • Kipling says:

      09:31am | 29/10/12

      If it was not something that impacts all Australians this would be absolutely laughable. I expect the mining company owners have a great chuckle….

      Neither party actually had a good plan (if either party is to be believed on what they say) to reap the benefits from OUR resources. The bottom line is that our resources have, in effect, been given away to predominantly off shore companies, or local companies with significant off shore interests that they can also slide under the cap.

      The real bottom line there is that Australians gain very little over all in benefit from mining of Australia’s resources. Those employed in mining and raking in the big bucks (for the moment at least) do not in any way shape or form represent enough of the population to cover that loss. The taxes paid by the wage earners also does not in any way come near to covering the revenue overall from mining of Australia’s resources.

      We simply lack the politicians of either brand to be effective in managing this one aspect of our economy that our politician might actually have some influence over. None have the where withall or the backbone to be tough enough on mining companies.

      Besides it is much easier being tougher on those needing medical care, education or some welfare support. They are the best ones to hit. After that comes those who are willing to work for a living, despite wages and conditions being significanlty attacked.

      The Labor party has demonstrably failed the very people it was formed to represent. The Liberal party simply never bothered to have a plan to look after workers since the beginning of federation. I guess in some sense, at least the Liberal party has been consistent in this.

      The really big question of course will be, what happens when the resources dry up. Australia will be left with some pretty significant holes, both in the ground and in the budget. I guess we should not mention that just yet because it is likely to be some time away. Of course, employment figures may take a dive then too, and all those unemployed miners will no doubt expect benefits for being unemployed - it seems to me that will be the time that people will ask why we did not reap more from our resources. Sadly, like the comment about the $22.2 Mill con job, it will be a hind sight comment rather than a pro active planning opportunity. To this correspondant it was obvious at the time that the mining adds were a con job, yet that comment was howled down widely.

      Reply

    • I hate pies says:

      11:40am | 29/10/12

      They’re not your resources. The state owns them - you have no right over them. By your reckoning I don’t need to buy land to build a house - I’ll just stick it on crown land, because I “own” it.

    • NESLIHAN KUROSAWA says:

      09:31am | 29/10/12

      Hi Jessica,

      Very timely article and that isn’t compliment at all. I am also very impressed with all the facts and figures you come up with.  Because all those facts and figures make most things that may be common knowledge to you, make it also possible for the ordinary members like me to digest all the complex information much more easily. That is what I choose to call sheer hard work and total dedication by itself. But the rich not paying taxes, is that anything new in our world?  All that extra money is needed to make more money as well as provide more jobs, right?

      As we have seen in the latest presidential election campaigning in the USA, Mr Mitt Romney was sort of forced to come with some facts and figures regarding his tax paying habits of the past.  And that was something like 10- 15 percent of all his earnings and I could not imagine how much money Mitt Romney makes during an ordinary tax year. You also know the expression of having the right doctor, accountant and a lawyer and its eternal benefits, right?  While the ordinary workers and voters are expected to pay the standard taxes, how come the people with higher incomes shouldn’t do the same?

      And talking from my own personal experiences, my ex husband always paid the same amount of maintenance over the period of almost 10 years. Now he is a director and a partner in a major real estate firm, I only wonder his accountant must be a magician with a pen and paper. I have demanded the child support agency who is famous for working with the Taxation Department but they have still done absolutely nothing up until today. 

      I always said that 10 years ago he was sort of not even middle management and now he owns the company as well as several big investments around Sydney!  I just think that it doesn’t give anyone any incentive to do the right thing any more. Newsflash it isn’t only the multi million dollar businesses doing it.  Look closely and you will discover that as it is fair game for anyone willing to play with facts and figures. Kind regards.

      Reply

    • Borderer says:

      09:44am | 29/10/12

      It took me about 10 seconds to work out how to avoid paying this tax, the genius PM, treasurer, et al still proceeded with the policy and have collected zero, I was completely unsurprised.
      It’s not to say that I am a taxation specialist, I’m not, I’ve worked in finance for nearly twenty years from being an accounts clerk to a financial controller, I also have common sense.
      The way to avoid the tax is obvious, it relies on profits from mining certain minerals so the way to avoid the tax is to reduce profits on that segement of your business. Ever wonder why BHP took control of their Pilbara Iron ore mine management from HWE? By assuming direct control they could water down and manage costs to avoid paying the tax where as with HWE running the mines (being a thrid party) there would have to be a profit to transfer and a tax to pay.
      The big miners stalled their support of the tax until they had enough time to restructure and here we are with a fat zero collected.
      Now you wonder why there was a pull out of mining investment, the answer again is obvious. With the MRRT reaping zero, what is the next logical step? Broaden the tax to cover all mining operations. Why would BHP sink billions into expanding Olympic dam when the next obvious step is to tax the gold and uranium being extracted? They are just playing two moves ahead.
      Why would you employ local Australians in mining administration either, it’s cheaper to employ them overseas and gouge on the transfer pricing, keeping the Australian profit lower while the global profit remains constant.
      In short the tax made mining in Australia globally uncompetitive, it has cost jobs and delivered to date $0.00 tax revenue. It has cost millions to implement while poleaxing mining investment. It was such a poorly thought out policy that lacked any fore thought as to global effects it was like it was developed by a bunch of high school students. The key here is the big miners manage a global business measured in the tens of billions of dollars, they make decisions in favour of investing billions in certain countries only when they can be confident that the investment is stable (ALP policies are not) and profitable (MRRT and CT pushed us over the line compared to other countries).
      While you may well say “Greedy Miners”, they are in business to make profit for their shareholders, they’ve never pretended to do otherwise, meanwhile our government is still scratching it’s head wondering why their tax revenues are falling.

      Reply

    • bananabender56 says:

      09:55am | 29/10/12

      +1 - great post. People can always make the choice of buying shares in the ‘Greedy Miners’ and reap the rewards instead of whinging about it.

    • Vince says:

      11:22am | 29/10/12

      @Bender - “(About 10% of the richest Australians) can always make the choice of buying shares in the ‘Greedy Miners’ and reap the rewards instead of whinging about it.”

      Fixed it for you.

    • Borderer says:

      11:33am | 29/10/12

      Vince,
      Your super fund does already.

    • Shane From Melbourne says:

      12:24pm | 29/10/12

      Umm, no. You should be pointing the finger at the rise in state royalties for the mothballing of projects in QLD, WA and SA. You should be whinging about the “Greedy States”.....

    • Borderer says:

      02:00pm | 29/10/12

      Shane,
      You should be pointing the finger at the rise in state royalties for the mothballing of projects in QLD, WA and SA. You should be whinging about the “Greedy States”.....
      The moth balling and shelving came immediately after the implementation of the MRRT and CT, I guess that’s just unlucky then?
      You see investing relies on return on the investment, increasing taxes or the threat of a widened tax base discourages investing, it’s pretty simple really. The increased cost or risk of cost and the investment dollars went elsewhere, it’s not rocket science, particularly when these investments are planned years in advance.
      Ongoing industrial action kissed off the BHP Mitsubishi coal mines in Qld, the unions suceeded in obtaining a 1 and 0 shift for their members who are now unemployed, all the while claiming a bad safety record (from the 1990’s) as being a ‘concern’.
      For the record, the feds had no business involving themselves in taxing minerals, they belong to the states. They thought they had a loophole but suceeded in collecting nothing and making a mess out of everything by proposing a tax that obviously wouldn’t be effective or good for the economy.

    • daniel says:

      09:53am | 29/10/12

      I wouldn’t have a problem with the mining tax in its original form if the Labor government weren’t intent on cherry picking and pork barrelling the Eastern states. And it’s evident that such would be the case given the constant “our” reference to the resources.

      If the revenue gained was guaranteed to go back into the states that had the major projects and was generating the revenue in the first place (ie WA and QLD), then it’d be excellent. That’s in addition to removing the need for state based royalties.

      Reply

    • gnome says:

      10:14am | 29/10/12

      Amazing that those dinky little rail carriages they use to transport coal in Queensland can shift any worthwhile amounts at all.

      Not amazing then, that Newcastle still loads more coal than any Queensland port.  A few years ago it was more than all Queensland ports together, but Queensland has been expanding.  Perhaps someone with a faster more reliable internet connection than mine can provide up-to-date figures?

      But NSW is used to subsidising the rest of the country.

    • Rev says:

      06:14pm | 29/10/12

      Err how many years back are we talking gnome?
      Hay Point has been a pretty large operation for over a decade.

    • Terry2 says:

      10:00am | 29/10/12

      I don’t claim to understand the intricacies of the MRRT tax system but I have listened to informed analysts (rather than the conservative opportunists) who seem to be saying, not unsurprisingly, that one quarter is not an adequate period over which to form a conclusive opinion on the success or otherwise of this ‘super profits’ tax.
      When you allow for the offsets available to the miners and the sudden downturn in mineral prices it really needs twelve months at least to see if this is a viable tax and if not, it may need to be recalibrated.
      Everybody needs to settle down and wait to see how it works out in the medium to long term. Unless, of course, a conservative government is elected next year at which time it wil all be academic as the tax will be repealed along with the carbon tax.

      Reply

    • Borderer says:

      11:22am | 29/10/12

      Terry,
      To give you an idea, 2bil at 3% for one quarter is 15mil in interest we’ve not achieved, measuring money you’ve not made is never as harshly scrutinised as money wasted yet the end result is identical.
      Look at my post above as to why the tax is ultimately flawed. In reality they should have left it to the states to manage royalties but that would not have allowed the feds to get their hands on the money (which is what this is actually about). Usurping the states rights is a tricky business, involving the numpties we have in power has been quite disasterous.

    • gnome says:

      10:08am | 29/10/12

      I hope someone brings this article by his national economics editor to Rupert’s attention.  I’m not a journalist.  I’m not an economist, but if I couldn’t do a hell of a lot better than this I wouldn’t be a Punch contributor either.

      Reply

    • kfr says:

      10:10am | 29/10/12

      Bit of a hack article this. What about payroll tax, company tax, royalties and more that the miners pay????? hmmmmmmmmmmmmmm Did the author forget these TAXES?????? As for the mrrt, been known for some time the big 3 miners would pay little/no tax in the first 5 years or so as they can write off big investments against the tax. Jooles negotiated this outcome.

      Reply

    • michael j says:

      10:26am | 29/10/12

      K Rudd’s idea of Nationalizing the Mining Industry was half hearted at best,, 
      That the Mining Industry was able to change the Leadership of Australia with an Add campaign costing only a few $$$ is probably not a good thing?

      Reply

    • the moor says:

      10:27am | 29/10/12

      Game set and match to the miners.  For just a small investment they managed to neuter the Henry Report tax proposal and with the sell out of the Liberals ensure the profits will remain theirs.  The real losers - the Australian people.

      Reply

    • Labor Tax Strategist says:

      10:49am | 29/10/12

      Hey look! They have money! We want it!

      Your super funds will be next.

      Reply

    • OzTrucker says:

      11:18am | 29/10/12

      I may just be a bit too obvious to say but I just don’t get it.

      The miners must be paying some taxes. Company taxes etc. Right? The government has allowed for this projected income already. The amount they will make from these types of income is not fixed but they know it will be x million/billion each year. It has been for the last however long. Right?

      So here is where I have a problem. If the MRRT is supposed to raise x billions of dollars and the governments’ budget has factored that in, now the tax is not doing what they forecasted, what happens to the budget surplus?

      Sorry Wayne you blew it again.

      Reply

    • TC says:

      11:53am | 29/10/12

      Um, Jessica lovey, the states own the resources, not the Australian people. You know that pesky document that the High Court deals with?

      Reply

    • M.Mouse says:

      12:20pm | 29/10/12

      “It’s easy to be filthy rich when you don’t pay tax”

      The Labor politics of envy are so ugly. 

      Clearly you think you should be “filthy rich” instead and that it should just be given to you. If you want to rewrite the constitution so that the minerals suddenly now belong to “all Australians” go right ahead and put it to a referendum.

      If you (greedily) want “MORE”, then you can either buy some shares or buy a shovel and start digging.

      We all know this money wasn’t going to be spent on “all Australians” but used to pay interest on a debt for money borrowed for hare-brained schemes.

      Looks like the Miners have outsmarted Swanny and co. What else would you expect when out Government know nothing of running a business in the real world. 

      And lastly, “Greedy Miners” are also made up of shareholders…our Superannuation money, another thing Swan wants to plunder.

      Reply

    • ramases says:

      12:42pm | 29/10/12

      No one emerges as a winner in this political stoush; not Wayne Swan, not Joe Hockey and definitely not taxpayers, the ultimate owners of the nation’s precious mining resources.
        Interesting comment and where pray tell has one penny of Tax payers money been spent by these mining companies on setting up, infrastructure and employing the thousands of people in the industry. Its all well and good for people to say that these precious things belong to all Australians but its the Mining Companies that put up the capital to actually get them out of the ground. Now if the Government did it then we would all benefit except name me one Government in the last 50 years that would have the courage or the nous to actually do it.
        No the Mining Companies, their owners and their stockholders take the risks and also the benefits or the failures and all this and every Government does is to try and milk them for billions and then cry foul when the Mining Companies don’t play ball.
        I don’t begrudge them their success as without them we would have been a basket case when the GFC hit and are now hoping that the boom will continue so that this Government wasteful ways can be paid off using the profits, wages and taxes that they generate. Good on them for finding ways to not pay taxes levied just to make the books look good and for no other reason. Another monumental failure by a Government bedevilled with monumental failures.
        This Government banked on raising billions in revenue from this tax but as usual has got it so wrong so we are left with a Treasurer running around like a chook with its head cut off trying to find savings because they got it so wrong and the budget will once again be in the red.

      Reply

    • Esteban says:

      01:02pm | 29/10/12

      The mining tax puts the Federal Government at the back of the line when it comes to putting up money to build the infastructure to support these projects but positions them upnear the head of the line to collect tax.

    • Esteban says:

      12:43pm | 29/10/12

      I thought this article was emotive. The headline suggests that miners pay no tax at all. They pay the same company tax rate as every other Australian company.

      The salary of the CEO is not relevant to the issue.

      The article incorrectly states that the minerals belong to all Australians when the constitution enshrines ownership of the minerals to the states.

      This might seem pedantic but does anyone in those safe ALP seats in the South East corner of this country wonder why the ALP only have 3 of the 15 seats up for grabs in WA?

      Get yourself outside the SE corner of Australia and you will see that people in the mining states instictively know that this tax is about deviating money that is needed in the produstive part of the nation to the unproductive.

      WA for instance is growing at twice the rate of the National rate.It takes money to fund growth and too little of the MRRT is returned to WA as infastructure monies.

      Taxing productive to prop up unproductive comes with complications. In previous mining booms people migrated from the less productive parts of the country to the jobs. This time people want to sit on the dole in Western Sydney and send money from the mines to pay for it.

      Out of every 5 people migrating to WA for a job 1 comes from the Eastern states and 4 comes from overseas.

      The article also failed to explore the cost to the nation’s reputation of introducing a tax in what was an ambush fashion. ie If you are going to damage our standing as a predictable place to invest then you might as well get something for it.

      To damage our reputation and get nothing or little in return does not seem very sensible to me.

      I think Jessica Irvine was on the right track last week when her artcle was about shrinking the size of the public service.

      Coming up with new taxes for the productive sectors of our economy while allowing the public service to be bloated does not bode well for our future.

      Reply

    • Jim says:

      01:01pm | 29/10/12

      Oooh oooh…nasty evil miners…taking what is MINE MINE MINE!!

      A few things you ‘forgot’ to check Miss Irvine; (all figures off the top of my head as it’s a busy day…with redundancies and what-not)

      - of BHPs $15.4bn profit, how much of that was made in Australia? BHP is of course, a global company.
      - of Rio Tinto’s $6bn WORLDWIDE tax and royalty bill, did you know that $4bn of it was paid to Australian governments? Hmmm…66% of the tax going to a country that provided just 10% of the profits.
      - quarterly profits from the big 4 banks exceed yearly profits from the big 3 miners, by a substantial amount. Oh wait, the government can’t chase super profits from them as a few mouse clicks can send all their assets overseas!
      - each of the major mines in the Hunter Valley inject over $500m in wages and contracts to the local community. Maybe treasury experts can model the flow on effects of that *chuckle*
      - Hunter Valley mines give millions each month to local councils, but we’re been dodging the same potholes for 5 years and counting.

      And the big one…did you know that since the high fiving that went on amongst the clowns that run this country when the MRRT went through, that in the Hunter Valley there have been over 17,000 people directly working for the miners made redundant? That’s only the people that turn up to site. It doesn’t include the extra staff for contracting companies (admin, HS&E etc), nor does it include people laid off in other areas due to reduced cash flows.

      And that’s just in one small part of the country.

      Coal has been hit hardest, yes…the profits in coal are always negligible over a full commodities cycle, but other sectors will feel the pain soon.

      So by all means…go to Bunnings, grab yourself a pick and a shovel, and go and dig up YOUR mineral wealth!

      I’ll just stay angry at the banks.

      (cue an auto response from the beloved Badger, with the same boring old comments about holes in the ground, dirty faces and blow flys…wonder what tagname he’ll hide under today?!)

      Reply

    • I hate pies says:

      02:03pm | 29/10/12

      I think you’re talking about the carbon tax, not the MRRT, in your reference to high-fiving…your point is still very valid though.
      When talking profits, gross dollar amounts are a misleading metric; they must always be taken in the context of the input required to achieve that output. It’s like comparing the carrying capacity of a 250t dump truck with a ute. ROI or profit margin should be used, and then compared to other large businesses; ie. banks and the retail duopoly. This would highlight the huge capitali investment the miners make. Risk should also be taken into account - we’re seeing the severity of the mining cycle first hand right now.  BHP are actually under performing.

    • Sprinter says:

      01:04pm | 29/10/12

      Your article, and the government, fail to take into account the risks and costs involved in many of these minimg projects before any turn into a profit producing enterprise. If the minerals are everyone’s why isn’t the government putting its money at risk and exploring vast areas of Crown land. Surely the “super profits” a mine generates can only help get budgets into surplus?
      The government would rather sell these exploration leases off to mining companies and then tax them through the whole process and charge them a super profit tax on the few projects that are successful.
      Shortsighted and knee jerk response to offsetting Labors dismal economic management. As another comment stated earlier, why don’t they target the Banks as well if they’re genuine about it?

      Reply

    • J.t says:

      01:08pm | 29/10/12

      “not Joe Hockey and definitely not taxpayers, the ultimate owners of the nation’s precious mining resources. “

      Do we not respect property/contract rights in this country anymore??

      A mining lease is issued for the express purpose of that company for the aformentioned use.
      While the STATES may own the land, they have no control over its use once the mining company has gotten all the necessary approvals…oh yeah and the state agrees to lease the land….If we the people don’t want to give the land to the miners under the current tax system, thats simply to bad.


      Regime we are free to vote out the current government and demand new conditions for miners and the mining of our resources.
      However once leased at the agreed rate we can’t and shouldn’t cry about it.
      The Federal Government has no place either constitutionally or morally to override the states.

      Jessica your argument is based on an argument that we just ignore contract law.

      Just as if I agree to rent out my house it has to be at a rate and a timeframe both lessee and lessor agree to. 

      My personal circumstances may change half way through the lease and I may be unhappy that I agreed to that time frame, however the contract is signed.

      If you want to run the “it’s our resources” argument, it must be on future resource projects and not on current projects.

      Respect the laws of our nation.

      Reply

    • BruceS says:

      01:14pm | 29/10/12

      Sorry Jessica, I found your article Divisive and Emotive, which does not raise the standard of knowledge for the reader. A simple explanation of the flawed Gillard deal, would have been more useful.

      Reply

    • Mark says:

      01:17pm | 29/10/12

      It’s interesting that everyone who argue’s against the tax uses the “we’ll lose jobs and investment overseas” argument- as far as I know, resources within the earth do not disappear. What benefit is achieved by mining them all now when the supply chain is plentiful? Is the demand for natural gas going to go down in the next 100 years? The answer, of course, is no; but the never ending search for immediate profit is the mode of decision making used in Democracy, usually because of the lack of intelligence in the voting population, encouraged by the establishment.

      Reply

    • I hate pies says:

      02:55pm | 29/10/12

      So, what you’re saying is that only stupid people want to make a profit?

      Are you by chance a Uni student? I don’t mean to offend, but you seem mighty self indulgent, arrogant and naive…just like a Uni student.
      I’ll help you to understand why they want a profit - quite simply, if you don’t make a profit, you have to fund your ongoing operations with your own money. Eventually, you run out of money; then your business folds, and you’re broke.
      The benefit of mining as much as you can now is due to “opportunity cost”. Ie, if you don’t mine it now it will be worth less in the future, and you will have a diminished profit. You will have lost the opportunity to make that profit. That and more volume equals low unit rate and higher profits.
      I could start on socialism versus capitalism and eroding wealth, but we’ll leave that for another day. I’ll let you bask in your elevated self-worth for a while longer.

    • Brian says:

      03:14pm | 29/10/12

      “Applying on profits above a certain level, it captures a bigger slice of the action in good times for the ultimate owners of the commodities - the Australian people - while also sheltering mining companies from tax when times are not so good.”

      Nope, sorry, the constitution makes it rather clear that the owners of the commodities are not the Australian people, but the people of the state in which they lie. Western Australian minerals are owned by the people of Western Australia. Queensland by Queenslanders, Victorian by Victorians.

      Reply

    • bananabender says:

      03:20pm | 29/10/12

      The STATES own the minerals according to the Constitution. They sell the right to mine in exchange for a royalty.

      Reply
 
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