The government and the mining industry are now negotiating in public, as BHP Billiton chief Marius Kloppers made clear in my interview with him on Inside Business yesterday.
The new resources rent tax won’t be withdrawn and the rate won’t be cut from 40 %, but it will be modified.
Kloppers laid out the terms of the less hysterical members of the industry: that it shouldn’t apply to existing mines; the net tax burden should be competitive with other countries; different minerals should be taxed differently; it should be limited to value-add from the resources, and exclude profits from infrastructure.
He also made it plain that BHP, at least, was serious about not going ahead with future projects if the tax is not modified. The government has no choice but to negotiate.
But then again, Treasurer Wayne Swan’s government knew those four conditions before last Sunday. That’s why it was leaked in January, so he could see what the miners said. Maybe they didn’t quite believe he would do it, and weren’t alarmed enough, but Swan ignored them last Sunday, although he also foreshadowed a long period of consultation and the possibility of changes.
It’s a strange way to conduct tax policy – announce a drastic ambit claim, watch as Australia’s reputation for stable and sensible governance is trashed; infuriate the mining companies and let them start crossing Australian projects off their priorities list; and then start consulting about what the tax might actually look like.
It’s hard to see Kloppers’ four principles getting up in full. Apart from anything else, tomorrow’s budget will include the proceeds from the Resource Super Profits Tax as it is currently designed, which will help get it into surplus in 2013-14.
I’d say the final shape of the RSPT will depend on how well the miners perform over the next 12 months and how much income tax they cough up.
If it’s a lot, and the government’s budget position is looking better than forecast when the Mid Year Economic and Fiscal Outlook is published in November, so the RSPT can be modified without altering the forward estimates to be published tomorrow, then it might be wound back then.
Just a guess. Let’s just hope too much damage isn’t done to Australia’s future as a resources producer in the meantime.
