Hints have surfaced that the mining tax package, so painfully negotiated over the past three years, will be reopened, along with signs the carbon tax will do far more damage than its supporters admit.
By midyear, Australian miners will have a better understanding of what it means to be declared an enemy of the state.
That might sound like harsh criticism of the government led by Prime Minister Julia Gillard but it’s not really when you consider what’s happened over the past two years and how easily deals are undone.
The abrupt change of mind on the carbon tax shortly after the election of the Gillard government can now be seen as standard operating procedure which is likely to be confirmed in next month’s budget when the rules underpinning the mining tax are changed, perhaps dramatically.
Rumours of a third revision of the mining tax have been circulating in political circles for the past month, driven by the government’s realisation that its finances are in a mess with the promise of a surplus next year threatened by a whopping $40 billion shortfall this year.
Lower than forecast company tax revenues and the discovery that the second version of the mining tax is a dud have forced Treasury officials back to the drawing board with instructions to find an extra $10 billion, or perhaps a lot more, from the mining and oil industries.
The extra funds will probably not come from an increase in the rate of the super-tax to be applied to the profits of iron ore and coal companies.
It will come from an alteration to the tax write-offs that miners are allowed on their investment in capital equipment and other changes.
To the man-in-the-street, also known as Mr Average Voter, changes to depreciation schedules and other accounting procedures, such as claiming for interest payments and for outlays on exploration costs, will be impossible to follow.
In that sense, the tax-accounting treatment of the mining-tax package negotiated privately by BHP Billiton, Rio Tinto and Xstrata, will be a nifty political marketing tool.
“Look everyone,” the government will say, “we haven’t increased the mining tax, we’ve simply cleaned up around the edges, closed loopholes and made it fairer for all Australians”
If Dryblower was a betting man he would be prepared to put a large wager on the marketing of the looming changes following an argument along those lines.
Industry leaders are slowly waking to the dangers ahead but just as they missed the boat with the first version of the mining tax – the Rudd version, so are they too late with their protests about what’s happening now.
Both the Minerals Council of Australia which represents big miners and oil and gas lobby group APPEA have lodged protests about what’s being proposed by Treasurer Wayne Swan in his May budget.
MCA chief executive Mitch Hooke on Friday told the Australian Financial Review: “The stripping away of fuel tax credits and changes to the long-established exploration arrangements would be a hammer blow to confidence in the capital market.”
Yes, Mitch, you’re right.
But you are also too late and have been too trusting of a government which has a well-worn track record of saying one thing and doing another.
What Dryblower thinks he is watching is the final fling of a government that knows it is heading for a thrashing at the next election and is determined to make the changes it believes are good for average Australians before it makes an inglorious exit.
The latest poll results showing Labor close to an all-time low, on top of the Queensland electoral rout, on top of the New South Wales electoral rout, brought home the reality that the Gillard government’s days are numbered, which is hardly a controversial claim given it is hanging on to power by the skinniest of margins.
Gillard and company know the next 18 months is all the time they have for making changes to the way Australia functions and they are determined to tax the enemies of their social welfare focus and reward voters in electorates which may stay loyal at the next election.
That means a huge tax whack for mining and oil, plus a high-priced carbon tax which in turn means soaring costs and tougher business conditions for everyone.
This article first appeared in ILN's sister publication MiningNews.net.