Dryblower reckons it's time for the truth about the mining tax

EVER had the feeling you’re listening to a conversation between a number of people and no one is quite telling the truth? Dryblower did last week when he heard different views on Australia’s proposed new mining tax.
Dryblower reckons it's time for the truth about the mining tax Dryblower reckons it's time for the truth about the mining tax Dryblower reckons it's time for the truth about the mining tax Dryblower reckons it's time for the truth about the mining tax Dryblower reckons it's time for the truth about the mining tax

 

Staff Reporter

Andrew Forrest, chief executive of Fortescue Metals Group, the most successful new entrant in the iron ore business, said the tax discriminated and would “crush the developing sector” and big miners, such as BHP Billiton, would pay a lower tax rate than small miners.

Treasurer Wayne Swan said Forrest was talking “bunkum”, a delightful old expression which translates into nonsense, hogwash or twaddle.

David Flanagan, CEO of Atlas Iron – one of the smaller producers – said the tax would make it harder for “companies like us to start, survive and grow”

Greens senator Adam Bandt said to be effective, the proposed tax rate should be increased and other minerals, such as gold, should be added.

Somewhere in the widely differing views lies the truth about the mining tax and Dryblower reckons it’s time it was dragged into the open because of these two points:

Some of the miners are exaggerating and missing one of the key positive points in a special tax on mining – and yes, there is valid reason for such a tax.

All of the politicians are exaggerating and missing the point that, as currently structured, the new tax is absolutely useless.

What triggered a re-start of the mining tax debate, which has been running hot since early last year, is the acceleration of plans to table the tax in the national Parliament by the end of the year and the release of an accounting firm’s analysis of who pays.

The two actions dragged the tax back into the political limelight – after the brew-ha of the Qantas fleet grounding and farcical financial events in Europe – with neither opposing side covering itself in glory.

Swan’s retort and the Greens’ demands to widen the tax were in a category of cheap shots which failed to address the fact the tax as it now stands is a dog’s breakfast.

In fact, it is such a mish-mash of theoretical concepts and bureaucratic fumbling that Dryblower suspects if someone had set out to design a tax with deception and obfuscation at its heart, this is what would emerge.

Like the carbon tax, which is also making its way through the parliamentary process, an entire new division of the accounting profession will be required to understand how the tax works and a separate division of the legal profession will emerge to find the loopholes.

Winners from both taxes will be lawyers and accountants but not the government that invented them or the Australian economy that can handle both taxes if properly designed, marketed and applied.

Take the mining tax as a case study because most readers of MiningNews.net are strongly opposed to any new tax on their industry – a stance which is perfectly understandable.

But there is a bigger picture in the background.

It’s called the overall welfare of Australia and the 20 million people (90% of the population) not directly benefitting from the boom in mining and natural gas developments.

The high value of the Australian dollar relative to other currencies is a symptom of the mining boom but also a warning sign of an emerging and destructive economic sickness known as Dutch disease.

First observed during a natural gas boom in The Netherlands in the 1960s, the “disease” destroys industries not directly exposed to resources.

Back then, famous Dutch companies such as Philips, inventor of devices such as the transistor radio, came close to bankruptcy and were forced to sack thousands of workers and relocate production to other countries because the soaring value of the guilder rendered it uncompetitive.

Stack that piece of history alongside the problems at Qantas, the slow death of Australia’s tourism and education-export industries and the possible end of the design and production of the Holden Commodore.

Dryblower is not suggesting a sweeping and destructive tax on mining but he can see the point being made by advocates of a tax which blows the froth off the boom (fairly), with government forced, by law, to park the surplus in a sovereign wealth fund for when the boom ends.

Right now, we seem to have a mining sector that wants it all and isn’t prepared to share and a government that hasn’t got a clue about how to run a balanced economy which saves money in good times and spends it in bad times.

Perhaps we’ll get it right one day.

Perhaps government will listen and perhaps miners will see the bigger picture.

This story first appeared on ILN's sister publication Miningnews.net.

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