THE DISTILLERY: MRRT argy-bargy

The dismal returns of the minerals resource rent tax are not a symptom of inherent loopholes or even a design flaw. It's simply the fact that it's a tax on super profits, the ones that don't really exist anymore. Australia's business commentators are more or less in agreement on this fact; the only variance is their level of disdain for the government on this point.

Fairfax's Elizabeth Knight and Philip Wen report on how the big miners have prepared themselves for offsetting the MRRT.

"While the focus has been on the dramatic shortfall in mining tax collections compared to original Treasury projections of more than $10 billion over four years, the most recent financial accounts of Rio Tinto and BHP Billiton show the two miners have built up $1.1 billion and $637 million in tax credits respectively. The credits did not reduce the amount of company income tax they had to pay, but can be carried forward to offset any future mining tax liabilities.”

The Herald Sun's Terry McCrann argues that the "single most troubling aspect” of the MRRT is the inability of Prime Minister Julia Gillard and Treasurer Wayne Swan to understand its "fundamental flaw”.

"This is that the tax – the MRRT, or minerals resource rent tax – is a super profits tax. As Gillard and Swan keep intoning like a pair of wind-up dolls, when profits are high, the tax will be high; when profits are low, it'll be low. Doh. Precisely. And that is precisely why you don't do what the duo then set about precisely doing: spending the money which was expected to be raised on new recurrent spending. Did anyone in Treasury or the PM's department tell them? If so, one assumes more politely than my basic Homer Simpson 'Doh?”

Business Spectator's Stephen Bartholomeusz agrees with McCrann to some extent, though he avoids the ‘fundamental flaw' argument. He simply agrees that the tax is doing exactly as it was supposed to – tax super profits, which are not on the go at the moment.

"Given that the tax was devised when iron ore and coal prices were at record, stratospheric levels, and that they have now fallen very substantially – and before some of the states raised their royalty rates – the mines aren't super profitable and therefore it is quite logical that the MRRT will raise far less than Swan anticipated. It should be noted, however, that the miners are actually handing over more of their revenues to governments, albeit in the form of increased royalties to state governments rather than MRRT to the federal government.”

The Australian Financial Review's Matthew Stevens writes how BHP Billiton has been attempting to enlighten the political establishment on how the high Australian dollar is hindering the MRRT's take.

"Unfortunately, from this distance, it doesn't look like Canberra is listening too hard. Nonetheless, the fact remains that the failure of the MRRT to get within cooee of the $2 billion expected for its first year is a product of circumstances unanticipated in its formulation. But no, that does not mean that the design of the tax is flawed or in need of any urgent fiddling. That the MRRT has generated a mere $126 million in its first six months is a reflection of realities that will become apparent when the likes of Rio Tinto and BHP report over the next week or so. But the predictable impact of lower prices on the government take has been amplified by the fact that the Australian dollar has not tracked mainstream commodities prices.”

The other big story out of yesterday's news cycle was the sale of the Reserve Bank of Australia's stake in the beleaguered Securency business, along with the Cameron Ralph report on the central bank's oversight.

Fairfax's Malcolm Maiden writes how the report concludes that the bank took "appropriate action” when the companies didn't appear to be performing.

"There could have been more oversight applied and it could have uncovered the alleged illegal payments earlier, but that does not mean that the bank's oversight at the time was inappropriate, it states. I would say that the report helps explain the debacle, but does not totally excuse it. It was a bad judgment right down the management line not to push harder on both NPA and Securency in 2007, when the allegations were swirling.”

The Australian's Andrew White similarly observes that the report reveals that more could have been done.

"Based on interviews with former board members of both subsidiaries and reviews of corporate governance standards, it paints the picture of entities with little material value to the bank's balance sheet deserving of ‘lighter touch supervision', and whose positive results through the 1990s gave the bank ‘comfort'. ‘With the benefit of hindsight' (that phrase again), ‘it is evident that the full array of risks were not initially recognised,' the report notes. It found that NPA did not have its own audit committee and used the RBA's instead, a choice that was fine in theory for a relatively small subsidiary but caused problems down the track.”

Meanwhile, Fairfax's Ross Gittins delivers another considered piece about Australia's development over his 39 years as an economics journalist. The senior columnist acknowledges the benefits of supply-side economic reforms championed by then treasurer Paul Keating and supported by opposition leaders John Hewson and John Howard.

But he's also become increasingly conscious of the "less tangible, less easily measured price” that we've paid for our greater wealth via these reforms. Namely: materialism, a wider wealth gap, commercialisation of sport, environmental problems and higher stress levels.

In company news, The Australian's Bryan Firth has a ripper yarn about a capital raising at Australian Renewable Fuels that shareholders are unhappy about, because it could deliver control of the company to an investment arm of the Pratt family.

The Australian's John Durie celebrates the career of CSL chief executive Brian McNamee, who will hand down his last earnings report today.

And finally, The Australian Financial Review's Chanticleer columnist Tony Boyd contemplates the possibility of the benchmark ASX200 breaking the 5,000-point mark. He also points out that investors excited about the bull market had better have gotten into the market six to 12 months ago.