Is the Resources Super Profits Tax — that’s RSPT for you Aretha Franklin fans — very different from the tax slug on medium and large businesses proposed by Tony Abbott to fund his paid parental leave scheme? That’s the one, you’ll recall, that may have looked like a Great Big New Tax, but was actually an “investment in human capital”.
Having castigated Abbott for his proposed attack on successful businesses, we should run the same ruler over the RSPT. What damage will it do? Who will really pay?
It’s similar in being a tightly targeted tax. The paid parental leave slug would have only applied to a few thousand of our most profitable medium and large companies. The RSPT will target a far smaller number of big mining companies. Both in effect single out a section of the corporate sector that, while powerful, are not exactly popular with voters (that makes Abbott’s comments yesterday about Rudd demonising the mining sector a bit rich). And both use the largesse reaped from it for political purposes — in Abbott’s case, to try to outbid the government on parental leave, in part by perpetuating the sort of middle class welfare that became a byword for the Howard government; in the government’s case, to fund a business tax cut that strongly targets small business, a sector the government is keen to keep on side.
But the comparison ends there. Abbott’s tax slug would have been passed on to consumers, and to shareholders, through higher prices and lower dividends. The RSPT will be passed on to mining companies’ consumers — most of whom are overseas — shareholders — many of whom, again, are overseas, particularly in the case of BHP-Billiton, Rio Tinto. Indeed, much of the RSPT will be paid, one way or another, by Chinese interests.
Hands up anyone, Clive Palmer apart, who has a problem with that?
That the RSPT will fund a permanent cut in the corporate tax rate is a mixed blessing. Our reliance on corporate tax has increased in the past decade courtesy of successive income tax cuts. This left our fiscal base more exposed to the impact of recessions, when one arrived, than it would otherwise have been. Reducing corporate tax will go some way to remedying this. The problem is that the RSPT is a potentially volatile tax base, dependent on commodity prices. Wayne Swan was asked about this yesterday and pointed out that the $9 billion a year the RSPT would generate about 3% of government revenue. Moreover, it’s a fair bet commodity prices are going to stay strong for an extended period, driven by Chinese and broader Asian growth.
But if that bet doesn’t come off, the design of the RSPT — it hits super profits hard, but it also treats more marginal resources projects, and exploration, more generously — will end up costing taxpayers a lot of money.
A more stable base, such as an expansion of the GST would have been preferable. The best option would have been to remove the moronic food exemption foisted on the Howard government by Meg Lees, which has been costing taxpayers and businesses ever since.
The last word should probably go to Mitch Hooke, of the Minerals Council of Australia. Hooke is an almost perfect indicator of good policy. If he’s against it — think a charge on carbon emissions — then it’s usually a pretty good idea. If he gives it the thumbs up — for example, Workchoices — then any sensible government should drop it cold.
Hooke, in his default setting of high-dudgeon bitching and whining, yesterday claimed that the RSPT “will destroy value, slow investment and increase sovereign risk in the Australian minerals industry”.
On past form, that guarantees it should become an important component of out future tax system.