The West Australian National Party is like a dog with a bone when it comes to taxing the big iron ore miners, unbowed by their resounding defeat in the state election.
Their plan is simple: increase the iron ore royalty from 25c to $5.00 a tonne and spend as much as possible in the bush through their Royalties for Regions program.
Former Nationals leader Bernie Grylls lost his seat after virulent intervention by foreign mining companies in the recent state election campaign. The mineral rent-seekers spent an estimated $5 million on a mere 20,000 voters in his Pilbara electorate. The money thrown at this ‘problem’ was probably much more.
New Nationals leader Mia Davies knows sound public policy when she sees it: tax the economic rents foreigners are currently extracting – income spent everywhere but in Australia. Further, the royalty is pain-free for WA voters and popular among those who can recognise the legalised theft of WA’s irreplaceable mineral wealth.
The Nationals are right to insist miners contribute to state coffers – their capacity to pay is beyond doubt.
WA is the largest iron ore producer in the world, with 37% of global production and 49% of global iron ore exports in 2014. Production of 710mt (2014) multiplied by $5 would bring in $3.5 billion a year. So, the miners spent $5 million plus to save themselves $3.5 billion a year, an extraordinary return on investment.
Disrupting a first-world democracy is nothing compared to these riches.
Australian citizens are entitled to expect a Resource Super Profits Tax based on Earnings Before Interest Depreciation Tax and Amortisation. But as Cameron Murray points out in Prosper’s submission to the recent, failed Petroleum Resource Rent Tax inquiry, if our country lacks the institutional strength to fight hard for good economics and sound policy, we must settle for royalties.
Even if the extra income was spent solely on debt reduction, WA would benefit enormously. The WA Treasury estimates state debt will rise to $41 billion in the life of the current parliament.
The former Barnett government borrowed heavily and invested in building the state. Colin Barnett now has plenty of time to mull over his failure to properly tax miners – all that civic infrastructure would have been fully funded and the Barnett government likely still in power, mining investment boom-bust or not.