Get the "good oil" from Senator Cormann on today's changes from the Government

Today Julia Gillard announced a series of changes to Labor’s deeply flawed super tax on mining. This is after the mismanagement and incompetence of this high spending, high taxing, big debt and deficit Labor administration has already done enormous damage to our economy.

Clearly Julia Gillard was desperate for a political fix. She desperately needed a political fix because the next federal election is getting closer and closer.
The question has to be asked though – would any ‘negotiations’ have happened at all if it wasn’t for the election fast approaching? What will happen after the election?

Given the track record of the Rudd/Gillard Labor government over the past three years – the $2.5 billion tax grab on our North West Shelf gas project in 2008, the failed attempt at a $120 billion great big new (Emissions Tax) in 2009 and the now failed attempt at a $12 billion Super Tax on Mining in 2010 – does anyone really believe that anything will change after the election?

Julia Gillard was part of all the decisions over the past three years – first as part of the so called ‘Gang of Four’ and now as the PM. This Labor government has sought to impose massive tax increases (with a nasty ideological bent to them) every single year they’ve been in power. Once the election is out of the way, what do you think will happen?

LABOR’S ANNOUNCEMENT:
If you’re interested in the detail you can find it here: http://www.treasurer.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/055.htm&pageID=003&min=wms&Year=&DocType=
You will note that the Orwellian reference to ‘super profits’ has gone (even though the profits from which the tax is proposed to apply has been increased by 7%).

In summary:
- the Government has decided to replace the so called Resource Super Profits Tax (RSPT) with a Minerals Resource Rent Tax (MRRT);
- unlike the RSPT, the MRRT will only apply to iron ore and coal, with the Petroleum Resource Rent Tax to be extended to onshore oil and gas projects (where at present it only applies to offshore oil and gas projects – ie those in Commonwealth waters – incidentally with the exception of the North West Shelf gas project, which will now also be included);
- the MRRT rate is proposed to be 30% and, depending on various conditions it is supposed to apply to profits at 7% above the long term bond rate (so from 12-13%)
The government is asserting that they can do all of this, while revenue will only go down by $1.5 billion (from $12 billion).

THIS NEW TAX ON OUR RESOURCES IS STILL BAD FOR WA!

Colin Barnett has already pointed out that there may be constitutional issues involved, given that this is a federal tax on State owned resources. Value based State Royalties ensure that the people of Western Australia get a fair return for their State owned resources.

Australia benefits because increased revenue from royalties for Western Australia means a reduction in our share of GST revenue allocated through the Commonwealth Grants Commission and consequently and increase in the share of GST revenue going to other States.

The suggestion in the Henry Review that State royalties should be replaced by a profits based resource rent tax would mean those mining ventures not making a profit would get access to our resources for free. Where is the fair return for the community in that?

The Commonwealth has said in the past that they will refund State royalties – though the detail of all the in’s and out’s of that under this new announcement are still a bit unclear.
I wonder how much of that $10.5 billion will be coming from Western Australia? And how much of it will come back to WA after it has made its way to Canberra?

THE REALITY IS THAT Labor’s proposal for a great big new tax on mining has caused great damage to our economy. Their mismanagement and incompetence has created two months of uncertainty, which has cost investment and jobs and has trashed our international reputation. It was this bad Rudd/Gillard Labor government which created this problem in the first place. Julia Gillard was centrally involved in the original mining tax decision. As Treasurer, Wayne Swan was a key architect of the tax.

This was a mess of a policy and Labor now wants to claim credit for abandoning its own destructive, unwarranted tax. This is no way to run a country.

OUR POSITION
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- The Coalition opposes this new tax on mining. It is still a great big new tax. It is still a bad tax.
The Government wants a new tax. We don’t.
- In any form, this is a bad tax. It damages our economy and destroys our global reputation as an investment destination, costing projects and jobs.
- The fact remains that a $12 billion tax grab has turned into a $10.5 billion tax grab – a $10.5 billion slug on industry and jobs.
- This new tax proposal will still have significant additional impacts on the small and medium mining sector.
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- Julia Gillard is proposing to give Australia one of the most complicated resource taxing regimes in the world.
There is a serious question mark about what this will do to the budget bottom line. Labor should release the Treasury modeling immediately so it can be properly scrutinized. They should also disclose the impact these changes will have on different types of businesses across the mining sector, such as on smaller miners and different minerals, and the broader economy.

Let me know your thoughts.
Best wishes
Mathias Cormann
Senator for Western Australia
Shadow Minister for Employment Participation, Apprenticeships and Training
Level 38 Exchange Plaza, 2 The Esplanade PERTH WA 6000 | GPO Box B58 Perth WA 6838 |
PER 08 9325 4227 | CBR 02 6277 3457 | senator.cormann@aph.gov.au|www.youtube.com/mathiascormann|
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