Are we subsidising the mining industry too much? Yes is the answer according to Ross Gittens in his recent article. The article comes on the back of a report to be released by the Australia Institute, alleging that the mining industry receives numerous subsidies. Despite receiving numerous subsidies, the mining industry contributed, "$121bn paid in Federal and State revenues over the last six years," according to the Minerals Council of Australia. That's an average of about $20bn every single year. Compared to assistance AI calculations: "the states gave the mining industry $3.2 billion in concessions in the financial year just ending."
To cut a long story short, Gittens wants the mining industry to pay more tax but doesn't say how much more.
While I agree that subsidies should be reduced or better yet abolished, taxes and royalties should be reduced to offset the reduced subsidies. The result of which is a mining industry that builds its own infrastructure and has the funds to do it from reduced taxes and royalties. Then we could say we no longer subsidise the mining industry which would also reduce compliance costs and other inefficiencies associated with regulations.
Once that is done, then we can have a debate about the mining industry paying more tax. Indeed taxing natural resources is one of the preferred factors of production to be taxed. A tax on minerals is more economically efficient than incomes taxes and corporate taxes. See the next chart by KPMG in a submission to the Henry Tax Review (where PRRT is the Petroleum Resource Rent Tax similar to a mineral's tax in that both tax factors which are completely immobile):
Does that mean I support the current "mining tax" that the Abbott government plans to scrap? No. The current mining tax bares little resemblance to the mining tax originally suggested in the Henry Tax Review. I agree that the current mining tax should be abolished. If you want a mining tax, then do it right and reduce the inefficient tax burden elsewhere in the economy (cutting payroll tax, corporate tax or income tax - see KPMG chart above). Doing it in this fashion is revenue neutral in the short-term and revenue positive in the long-term as economic growth is larger due to more efficient taxes.
Gittens article starts of well by describing the benefits of foreign direct investment but then entangles itself in a messy debate about the mining industry paying more tax. Unfortunately Gittens ignores the numerous savings that could be achieved if government was more efficient (as proposed by the National Commission of Audit) and instead calls for more economically harmful tax revenue to fund political and social programs.
At the end of the article Gittens says:
And this while governments, federal and state, are crying poor and cutting spending on many worthy causes.
Apparently, the end of the age of entitlement applies to poor people, not to big corporations. And that’s true for foreigners, not just locals.
As Ian McAuley, of the University of Canberra, has pointed out, we’re slashing our planned spending on foreign aid because we can no longer afford such generosity, but by abolishing the mining tax we’re being very generous to big foreign mining companies.
This makes sense?
To cut a long story short, Gittens wants the mining industry to pay more tax but doesn't say how much more.
While I agree that subsidies should be reduced or better yet abolished, taxes and royalties should be reduced to offset the reduced subsidies. The result of which is a mining industry that builds its own infrastructure and has the funds to do it from reduced taxes and royalties. Then we could say we no longer subsidise the mining industry which would also reduce compliance costs and other inefficiencies associated with regulations.
Once that is done, then we can have a debate about the mining industry paying more tax. Indeed taxing natural resources is one of the preferred factors of production to be taxed. A tax on minerals is more economically efficient than incomes taxes and corporate taxes. See the next chart by KPMG in a submission to the Henry Tax Review (where PRRT is the Petroleum Resource Rent Tax similar to a mineral's tax in that both tax factors which are completely immobile):
Does that mean I support the current "mining tax" that the Abbott government plans to scrap? No. The current mining tax bares little resemblance to the mining tax originally suggested in the Henry Tax Review. I agree that the current mining tax should be abolished. If you want a mining tax, then do it right and reduce the inefficient tax burden elsewhere in the economy (cutting payroll tax, corporate tax or income tax - see KPMG chart above). Doing it in this fashion is revenue neutral in the short-term and revenue positive in the long-term as economic growth is larger due to more efficient taxes.
Gittens article starts of well by describing the benefits of foreign direct investment but then entangles itself in a messy debate about the mining industry paying more tax. Unfortunately Gittens ignores the numerous savings that could be achieved if government was more efficient (as proposed by the National Commission of Audit) and instead calls for more economically harmful tax revenue to fund political and social programs.
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