As Crikey has revealed, Australia’s states and territories collected roughly 13% of their overall revenue from property, mining and gambling taxes over the past five years. Relying on such a narrow tax base has long raised suspicions that cash-strapped states and territories are in the pocket of developers. Senator Larissa Waters, mining spokesperson for the Greens, told Crikey today that “clearly the amount of revenue that state governments raise, particularly from mining, illustrates why they are always so willing to approve everything. There’s barely been a mine rejected in living memory.”

“The mining industry holds great sway over politicians of both persuasions,” Waters said. “The ‘roll out the red carpet’ approach, particularly in Queensland, where I’m from, means governments are wilfully blind to the damage that the mining industry can do to other industries like the tourism industry and agriculture.”

Waters says the Greens would “certainly not” argue the mining industry should pay less tax and would not be drawn on whether revenue-raising should be separated from regulatory responsibility, saying only it was a “valid question”.

But in the case of major mining projects, Waters says, figures revealed by Crikey show “why you need that federal involvement in regulation, that is one step removed from the revenue stream”.

“States have a clear incentive to approve, which is why you should not be putting them in sole control of that decision, which is what Tony Abbott is proposing to do with his hand-off of powers.”

It is fiendishly difficult to separate revenue-raising from the other roles and functions of government.

Former head of the revenue group at Treasury Greg Smith, who was a member of the Henry Tax Review and is adjunct professor of economic and social policy at the Australian Catholic University, does not agree with the view that the collection of taxes generates an unfortunate impact on regulatory activity.

“I don’t think that government political decision making is greatly influenced one way or the other by the fact that revenue is also collected in the economy in any sector. I don’t think there’s much force in de-linking revenue raising from the other functions of government.”

Former NSW premier Nick Greiner, whose government established the Independent Commission Against Corruption and who is now a prominent company director, argues the states are more likely to come under pressure because they take more discretionary decisions with significant economic consequences for specific projects and companies.

“The truth is the states are closer to the ground,” Greiner said, “so there is an easier potential [for corruption] in terms of planning decisions and allocation of mining rights and indeed with gambling. They are qualitatively different from the Commonwealth, which is removed from real-world economic decisions.

“The fact the states have those responsibilities may well be a reason to be why you might expect to find more corruption in those areas, but it’s more a relationship to the constitutional responsibility, which flows through to the revenue base.”

But Greiner challenges the assumption that states approve projects too readily. “You want the state to have an incentive to approve things, as long as there’s due process. The alternative proposition, that you’d want the states to approve things less, is a recipe for much less economic growth. The question is getting the process right — avoiding what we’ve seen in NSW, particularly with Eddie Obeid and John Maitland, where I’m not sure there was much wrong with the process, it was the way the process was applied.”

Smith, too, questions whether reliance on the taxes and royalties made jurisdictions more prone to corruption. “Corruption comes from the right to do something, it doesn’t tend to come from the price of ownership.”

He argues states and territories would have an economic incentive to promote development regardless, as economic growth would increase GST revenue, for example.

Smith says mining royalties are not taxes, which are properly defined as a compulsory unrequited transfer. Royalties, by contrast, are “a price … a payment to the sovereign owner of those resources for the right to exploit it. Why would you not charge someone to take what you own?”

While aware of arguments that gambling taxes have created an incentive for states to oversupply gambling venues, resulting in more casino tables and poker machines than there would otherwise be, Smith counters the argument ignores that gambling venues pay company tax and GST as well as state taxes, and the tax system as a whole falls more heavily on gambling than it does on food, say.

“The argument states have an incentive to over-approve pokies pretty much relies on a mindset that gambling is a bad thing. It’s a moral position that governments approve more gambling outlets than they should.”

On land taxes, Smith says there is a counter-argument that one of the things that causes land values to rise — and therefore increase the tax revenues — is refusing development. “You could equally argue that development restrictions raise property values more than permissions.”

 

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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