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)
Australian Tax Office detail on the MRRT