Dryblower suffers from tax deja vu

SOME people can sleep with their eyes open and ears closed, which is what Dryblower reckons Australia’s Resources Minister Martin Ferguson might have been doing over the past six months.
Dryblower suffers from tax deja vu Dryblower suffers from tax deja vu Dryblower suffers from tax deja vu Dryblower suffers from tax deja vu Dryblower suffers from tax deja vu


Tim Treadgold

That’s the kindest interpretation of Ferguson’s latest comments about Australia’s highly contentious super-tax on mining.

Back in May the government tried to foist a one-size-fits-all tax on an industry as diverse as there are stars in the solar system.

The result was chaos.

Then-prime-minister Kevin Rudd was axed, followed by the election of a lame-duck minority government which is pandering to cowboys from the north and tree huggers from the south.

As a sop to mining, and to end a damaging anti-tax advertising campaign, the government created a Mining Tax Policy Transition Group (MTPTG), a classic government reaction to a crisis – form a committee, complete with a name which could have come from a script of the Yes Minister comedy series.

This group is headed by Ferguson and former BHP Billiton chairman Don Argus and has the job of reviewing the original resources super-profits tax (RSPT) of May and the Minerals Resource Rent Tax (MRRT) of July – which means we have an almost complete alphabet soup of the MTPTG reviewing the RSPT and MRRT.

As if that isn’t sufficiently confusing, on Friday Ferguson revealed he had learned little, by saying he wants the mining industry to “speak with a common view” when making presentations to the MTPTG.

It is possible that Ferguson and Argus want to narrow the scope of their inquiry to the most important issues.

But, it is equally possible that Ferguson only wants to hear the views of a handful of mega-miners, and the lobby groups which they fund, especially the toothless Minerals Council of Australia.

By inference, Ferguson is saying he hasn’t got the time, or the patience, to listen to the views of small explorers and miners, and they have no choice but to become part of the industry’s “common view” – or not be heard at all.

Is it only Dryblower who can remember back to May when the government did something remarkably similar by announcing, without prior consultation, its original one-size fits-all mining super-tax?

Perhaps there is a subtle variation this time around, but not by much.

There is still same desire to boil a complex industry down so it fits tax law, rather than make the law fit the industry, and to do that by hearing only one point of view – that of the big miners which have already been in the ear of Ferguson’s boss, Prime Minister Julia Gillard.

Take magnetite as an example. This is the low-grade iron ore that requires extensive processing before it can be shipped to overseas customers.

If ever there was an example of one size not fitting all cases, magnetite is it. It is as different from direct-shipping ore as chalk and cheese.

In theory, magnetite is a part-processed material which Australia ought to be encouraging, but it is also something that the big two of iron ore, BHP Billiton and Rio Tinto, decline to invest in – perhaps because they have failed so miserably at other attempts at upgrading secondary iron ore.

Ferguson undoubtedly knows that magnetite is different, but also hinted that this might not be the case when it comes to tax.

“We’ve had companies writing to our department expressing their views about what they believe should occur, for example, on what is the taxing point say in magnetite, and indicating their desire to appear before the panel,” he said.

His preference is for industry groups to present “compromise” positions to the tax transition panel – because “it would be easier for the panel to resolve uncertainties around the proposed Minerals Resource Rent Tax if industry groups presented compromise positions.”

There are several ways to interpret what Ferguson has said. They range from:

  • We’re too busy to thoroughly understand the mining industry – we just make the laws
  • We still believe in a tax regime where one size can be made to fit all sizes
  • We already know what we’re going to do, so don’t waste our time

Consider the most glaring anomaly in the ongoing tax debate – a politician’s belief that a big company can understand, or care about, the position of a small company.

Atlas Iron chief executive David Flanagan picked up this point early last week when he, quite correctly, accused the big three of Australian mining (BHP, Rio and Xstrata) of selling juniors short in their secret tax deal with the government.

It is possible, given Ferguson’s comments about the need for the industry to speak with one voice, that the secret deals continue – and that the one voice will remain that of the big three.

First published Monday in ILN's sister publication MiningNews.net.