The government has shifted the start date on the tax debate into next year, the Financial Review reported today. The release of the tax reform discussion paper, initially intended to be before Christmas, has been delayed. Given recent events the government can probably fairly plead it has had other things on its plate.

But that hasn’t stopped some stakeholders from bolting from the blocks anyway. Today, the Australian Conservation Foundation released a report showing the government would spend $47 billion over the next four years encouraging fossil fuel use — the bulk of which is the fuel tax credit for diesel (I’ve previously argued the diesel rebate for off-road use isn’t a subsidy, but many, apparently, disagree).

And the single most evil lobby group in the country, the Minerals Council of Australia, has released yet another in a long line of “independent modelling” reports, this one an update on industry tax levels from a previously released report from the usual suspects at Access Economics. It got, in turn, the usual write-up from the Financial Review (The Australian’s Annabel Hepworth was presumably unavailable), where a mining executive declared “tax” rates in Australia were reaching “uninvestable” levels.

Of course, the report had nothing to do with tax rates at all. The purported tax rate for mining companies, 47.1% (or “nearly half of every dollar of profit”, as the accompanying press release dramatically declared) was based on the standard trick from the miners — including mining royalties in what they call “tax”. Fairfax’s Michael West nailed this lie the last time the Minerals Council and Access tried it. Royalties aren’t taxes, they’re a fee that we, the community, charge for access to minerals that we, not the mining companies, own. But the mining lobby insists on conflating the two. Only this time royalties form a significantly bigger proportion of the alleged “47.1% — read down into the report and you’ll see that royalties now form over half of the figure. Overall tax has, of course, fallen in mining along with the fall in commodity prices.

Amusingly, the report actually complains about state government royalties increasing while commodity prices are falling. Well, suck it up guys — because when you campaigned against the Rudd government’s mining tax, and then supported the Coalition and your mate Clive Palmer in abolishing the Gillard government’s scheme, you removed a mechanism that would have shifted royalties onto a cyclical basis.

Meantime, Fairfax yesterday spotted that Treasurer Joe Hockey and Finance Minister Mathias Cormann had used MYEFO to abandon anti-tax avoidance measures that would have saved taxpayers hundreds of millions in lost revenue, despite Hockey’s G20 rhetoric on cracking down on multinational tax avoidance. Hockey angrily denied the report this morning, insisting it was all about not penalising Australian companies that expand offshore. But who had lobbied against the measures? Why, the foreign-dominated mining industry, which appear to have virtually complete control over this government’s tax policies.

The decision may come back to bite the government. As we recently noted, corporate tax avoidance appears now to be on voters’ radar — regardless of voting intention. Voters wrongly tend to regard corporate tax as a kind of victimless fiscal crime — if there’s a budget shortfall, they think it should be made up with higher company taxes ahead of other tax rises or spending cuts. But the publicity this year of the staggering extent of multinational tax avoidance has elevated the issue to the point where it ranks as an issue of significant concern for all voters, including Coalition voters. Reports like the one from the ACF won’t do anything to allay such concerns, either.

Moreover, voters are already predisposed to regard the Coalition as representing the interests of big business. The government’s backdown on curbing tax avoidance will play into this, and the Minerals Council’s de facto control of tax policy might in the end become counter-productive. With every tax cut or subsidy mining gets, with every nonsensical report insisting the industry is paying half its profits in tax, with every Australian tax dollar lost to revenue into Caribbean havens or Swiss cantons, companies lose more credibility with voters. So, in the end, may the politicians who represent their interests — if they have any credibility left.

At which point, the full-blown tax debate we’ll start in the new year becomes a very risky thing.

Peter Fray

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