Mining companies and coalition members were jubilant yesterday as the Mineral Resources Rent Tax (MRRT) was repealed in the Senate, after years of bitter opposition.
Since the MRRT was introduced by the Labor government 2012 mining lobbyists argued the tax was highly complicated and discriminatory as it focused on iron ore and coal miners of a certain profitability level.
However, the tax included rules that allowed miners to use prior capital spending as a tax deduction, which ensured few companies made payments.
The Coalition government dismantled the arm of the Australian Tax Office which dealt with the tax earlier this year, in anticipation of the repeal, and ceased pursuing companies for the tax while it was still in legislation.
Prime Minster Tony Abbott said the repeal fulfilled a core election promise, however the bill also included delays to the compulsory superannuation contribution increase of 12 per cent, representing a broken election commitment to refrain from adversely changing super policy.
ABC reporter Chris Uhlmann pointed out to the prime minster that superannuation is a mix of workers wages and business profits, and that the Financial Services Council estimated the delay will remove $128 billion out of the savings of workers by 2025.
Abbott insisted the change was not adverse, and repeated the refrain “If workers want to make extra contributions to their superannuation, they can.”
Social welfare provisions remaining in the amended MRRT repeal legislation include the schoolkids bonus (now to be means tested and available to families on less than $100,000 per year); the income support bonus (to remain in place until the end of 2016); and the low income super contributions (to remain in place until the end of FY17).
Business Council: Still a burden
The CEO of the Business Council of Australia Jennifer Westicott said she was disappointed with the maintenance of provisions in the MRRT repeal, which she claimed still act as a “burden on Australia’s already unsustainable medium-term fiscal provision.”
“The whole process around the MRRT underscores the need for tax reform to be undertaken properly, rather than through ad hoc measures, and with the clear goals of ensuring governments have sufficient revenue for the future while creating an environment that supports jobs and investment,” Westacott said.
However, the business leader said the removal of the tax would make Australia a more attractive investment destination, and would assist growth in the resources sector.
Removal of a discriminatory tax
The South Australian Chamber of Minerals and Energy (SACOME) welcomed the MRRT repeal this morning, claiming the tax was unfair and inefficient, and discriminatory against the South Australia due to the vast amounts of magnetite ore in the state.
SACOME CEO Jason Kuchel said the chamber lobbied against the MRRT because of the additional beneficiation required to export magnetite ore, compared to hematite ore found in the Pilbara which requires less processing, and a lower all-in operating cost per tonne.
“SACOME believes mining companies pay their fair share of taxes and royalties through the various state and federal systems already in place; in South Australia this can be as high as 45 per cent,” he said.
The Minerals Council of Australia (MCA) chief executive Brendan Pearson congratulated the Coalition, Palmer United Party and cross-bench senators for finding common ground necessary to pass the MRRT repeal legislation.
Pearson said the MRRT added an unnecessary third layer of payment, on top of State royalties and Federal company tax.
These two instruments alone are estimated to have raised $40.3 billion in the two years to June 2014 according to new estimates by Deloitte Access Economics,” MCA said.
“This is on top of a record figure of $24.5 billion in 2011-12.
“And it is despite the fact that commodity prices have fallen by 50 per cent or more in the case of iron ore and coal in the last three years.”
Pearson said that revenues from company tax and royalties have totalled more than $156 billion over the past ten years, and that the company tax has tripled, from 8 per cent to 25 per cent.
He also argued that Australians did not need the MRRT to share in the benefits of mining and the economic boom of recent years, according to a Reserve Bank of Australia research paper released last month.
“The authors found that by 2013 the mining boom had raised real per capita household income by 13 per cent, increased real wages by 6 per cent and lowered the unemployment rate by about 1.25 per cent,” he said.
PUP plays with the big dogs
Only hours after maintaining he would not support the bill, Clive Palmer and his Palmer United Party (as well as motoring enthusiast Ricky Muir) struck a deal and flipped for the government once again to enable the amended MRRT repeal legislation to pass through the upper house.
In a letter to Palmer, finance minister Mathias Cormann said “The government appreciates the very constructive approach taken by the Palmer United Party in helping to remove the mining tax in a fiscally responsible way.”
On Monday Palmer said the bill would not pass through the Senate without the low-income superannuation contribution, income support bonus and schoolkids support bonus.
However, Palmer had already dropped his interest in the welfare payments for children of deceased war veterans, for which he adamantly campaigned earlier this year.
In March Palmer went on the record to say: “If they want to persecute children, people who have died for Australia, that's a higher principle than any sort of financial matter.”
“I think we've all got a responsibility as Australians to support those children whose fathers and mothers have given their life for the country.
“We support the abolition of the mining tax, I've been the biggest opponent of the mining tax all my life but I'm not going to persecute young children because of it.”
Palmer United Party spokesman Andrew Crook said this morning the benefit was dropped from the bill.
“PUP got exactly what it was after and had publically appealed for,” he said.
“IT REMAINS great outcome and exactly what he said [sic].”
Palmer rolled over to vote for the Carbon tax repeal in July, after insisting he would not due to links to the ‘Direct Action’ legislation, and aged pension entitlements tied to the tax.
Palmer still insists he will not vote for the $7 Medicare co-payment for visits to doctors, detailed in the coalition budget which is yet to pass through the Senate.