Recent discussion on the introduction of a resources rent tax has sent the mining industry into apoplexy, with many of their spin doctors predicting Armageddon if the Henry Tax Review recommendations are implemented. The mining industry predicts that a resources rent tax will stifle the growth of the industry, destroy jobs and slash export earnings. This is nonsense, however...

At present there is no common national royalty regime. Rates can vary from state to state, and vary from commodity to commodity. In fact, charges are levied at more than 40 different rates, usually calculated on the value or volume of what is mined. Uranium mining in South Australia is particularly good business for the miners, who are charged a paltry 3.5 per cent for digging up the stuff compared with coalmines in Queensland who are charged 10 per cent for making great big holes in the ground.

The proposed Resource Super Profits Tax (RSPT) is a tax on profit, rather than a tax on the value or volume of commodities produced. In a sense this is a progressive tax that has in-built safeguards. Royalties paid to the States will remain and these amounts will be credited back to the miners by the Federal Government. In other words, after calculating the tax payable on the profits generated, royalties already paid to the States will be deducted from the tax payable to the Commonwealth.

Moreover, losses from a particular project may be off-set against other projects owned by the same company, which are profitable, or offset against profits generated in subsequent years. In theory, the big end of town, (BHP and Rio), is going to be hit really hard and the mining minnows are probably going to be better off under these arrangements.

Now, the new billions of dollars of taxation revenue that will be generated from the RSPT are going to support new infrastructure development, particularly ports, railways and electricity production in the resource rich states, as well as help pay for the rise in compulsory superannuation from 9 percent to 12 percent to be phased in between 2013-14 and 2019-2020. So practically speaking, the returns on our superannuation funds will fall over this period, as the big miners, (which all of the super funds have to be invested in to maintain index weighting), are less profitable but this will be offset by rising contributions! Sounds like a zero sum gain to me.

Apropos to this, I wonder how many State Treasurers are sitting back thinking, rather malevolently, I can now raise the royalty rate my State charges the mining companies, thereby bypassing the need to pass on a percentage of their profits in tax to Canberra. They wouldn’t do that - would they? You bet they would - don’t ever get between a treasurer and a bucket of money, especially one dug out of the ground, they’ll have their grubby little fingers all over it before you can say kiss my dirt!

My partner commented that she was a resource and therefore, would also be seeking a rent tax from me! Let us see - WIFE - acronym, Washing, Ironing, Food shopping Etc. HUSBAND - acronym, Humorous, Urbane, Sensitive, Bystander, Asinine, Narcissistic, Dead! The latter acronym is a time in motion study of the male of the species in a long term relationship from the perspective of the female in the partnership. She probably deserves it - the resource rent tax that is - but I won’t be making that sacrifice until I am buried, along with all of the other valuables in the ground.

Let’s just hope that the RSPT doesn’t make the mining industry dead over time as well. Unfortunately however, there are more than just worms turning in the pay dirt!

Gary Hatwell Executive Chairman