Someone is wrong. Australia’s two biggest miners, BHP Billiton and Rio Tinto, and the analysts who follow their fortunes are not expecting to pay anything like $10 billion in mining taxes over the next three or four years.
Yet that’s what Treasury estimates will be raised from the mining industry, and the government wants to spend that anticipated revenue on corporate and other tax benefits.
I suppose the $10 billion could come from the rest of the mining industry but without BHP and Rio Tinto making big contributions it is hard to see anything like that sum being raised.
BHP and Rio Tinto are not saying anything. And Treasury is not good in the mining tax arena. Its former head, Ken Henry, completely messed up the first attempt at a super mining tax in his review of the tax system.
This second attempt at a super mining tax does not take into account the major investments miners are making and their effect on the tax revenue formula in the next few years. To raise $10 billion, or anything like it, we have to have another major commodity price boom (Digging deeper on the MRRT, July 5, 2010). In his KGB Interrogation, Joe Hockey sets out why he thinks the government has it all wrong. Here are extracts from the transcript:
"Hockey: Because you guys are not just interrogators, but you are investigators, I would suggest that you go to BHP and Rio and Xstrata and ask them how much of the mining tax they do expect to pay over the next ten years.
Kohler: What a good idea.
Gottliebsen: Joe, it’s nothing like $10 billion. It's not what the companies are expecting, nor is it what the analysts are expecting.
Hockey: Exactly. That is exactly our point. So what we’re saying is, do not lock in a structural growth expenditure against a diminishing tax. That is a poisonous cocktail for the federal budget and this mob keeps doing it. They’ve done it on the carbon tax package, where they have built in continual growing expenditure against a tax that even now the New South Wales Treasury said will be at least $5 billion dollars a year worse off in the federal budget from 2015 onwards.
"Now, the mining tax, you know and I know because we all speak to these businesses, we can’t find businesses that are going… big businesses that are going to be paying the mining tax and yet the Government is building in structural expenditure against these taxes. That’s why we’re voting against the company tax."
Hockey is right about the likely revenue to come from a mining tax. But of course the government will say they are relying on Treasury estimates and by the time the actual tax comes in everyone will have forgotten.