Posted by Big Gav in australia
The Australian news has been dominated by the shrieking from the mining industry this week, as they whing and moan about the government's "resource profits super tax" proposal. While they aren't happy about paying more tax, I imagine if all the money they get from the government was suddenly held back the shrieking would be even louder - The Age has a look at the endless river of cash bestowed upon the industry - Miners strangely silent on the billions they reap in tax credits.
The mining industry, in its furious offensive against the proposed resource rent tax, is playing the old magician's trick of getting you to stare at their right hand, while ignoring what the left is doing. The tax they pay is their right hand, the benefits they receive in return is their left.
Don't be fooled. Any fair discussion of resources tax must include not only the tax side of the equation, but also the billions of dollars of benefits the industry receives each year, courtesy of the Australian taxpayer.
Let's begin with fuel. You and I pay 38¢ per litre in excise when we fill up at a petrol station. BHP Billiton and Rio Tinto also pay tax on their fuel, but the government gives nearly all of it back through the Fuel Tax Credits program. The mining industry is the largest beneficiary of this scheme (which is available to a range of businesses), receiving $1.7 billion per year in credits.
Next, consider the generous tax breaks available for mining investment. If I decide to start up a factory, I'm not allowed to claim the cost of equipment as a business expense in the first year - I have to depreciate the equipment over time, based on how long the equipment is expected to last. But if I'm a mining company, I can deduct the full cost of exploration immediately, or even 150 per cent of the cost of exploration in some cases.
A special tax amendment the petroleum lobby snuck through in 2002 to override explicit determinations by the Commissioner of Taxation gives further preferential treatment to oil and gas assets. So, a petroleum company gets to assume for tax purposes that an oil rig, for example, will only last for 20 years, even if in truth it is likely to be productive for much longer.
These tax breaks on exploration and equipment cost taxpayers more than $1 billion per year. The Henry review recommended we get rid of them.
Instead of adopting that sensible recommendation, the government is now proposing an additional $500 million per year in direct rebates to encourage exploration.
The mining industry pays nothing for its greenhouse pollution, either. In 2006, the 65 million tonnes of pollution attributable to the mining sector had an implicit cost of $1.3 billion, at a very conservative cost of carbon of $20 per tonne.
Subsidised fuel and no price on pollution are a bad combination. Australian Bureau of Statistics figures show that, while most industries have become more energy efficient over the past three decades, the mining industry has become less so. It takes twice the energy to get a dollar's worth of minerals out of the ground today as it did 30 years ago. This is a trend we should seek to reverse, not reward.
And then there are direct government services. Geoscience Australia's annual budget is $130 million, much of which goes to providing free data and services to the mining industry. The CSIRO and various government research centres chip in another $130 million per year in benefits to the industry. And for the research the miners have to do themselves, they get $160 million back per year in the form of research and development tax concessions.
A billion or two for fuel, a billion for exploration, a billion for free pollution and a couple of hundred million for subsidised science . . . pretty soon we're talking real money.
And that's before we've even begun to talk about government-provided roads, rail, ports, electricity networks and other infrastructure.