Iron ore increased in value by 900% in a decade – through no effort of the owners. This is an economic rent that should be taxed for the benefit of all.
The Minerals Resource Rent tax is a bad application of a good principle. Its’ shortcomings include:
- elaborate depreciation writeoffs based on assets valued at market highs.
- The MRRT starts at the corporate bond rate plus 7%. That is 12%, rather than the proposed 5% under the RSPT.
- a 25% extraction cost sees the 30% rate effectively at 25%
These factors will see the MRRT deliver barely $400 million in it’s first year of operation, whilst BHP and Rio Tinto shareholders are expected to receive close to $10bn in shareholder dividends. Aren’t we all shareholders in our common-wealth?
Mining is one of the most profitable industries in the world. It extracts value from non-renewable resources and leaves. Australia’s Future Tax System proposed a Resource Super Profits Tax to share mining profits with the mineral owners – the citizens of Australia.
Prosper’s over riding philosophy is for equality of opportunity. Those that own natural resources have distinct advantages over those trying to run a business or earn a wage. Adam Smith and the classical economists recognised the tax system should rebalance these un-natural advantages.
The just-past, once in a century mining boom happened without this sharing, to the great benefit of miners. We have little to show for this era beyond a temporary increase in incomes and some very large holes.
Mining Democracy (our first post following new PM Gillard’s Mining Resource Rent Tax policy announcement)