A group of 20 economists have endorsed the Federal Government’s Resource Super Profits Tax (RSPT), claiming it would lead to increased production.
The group, which includes former Australian Competition and Consumer Commission chairman Allan Fels, said the industry should be contributing more taxation.
“Mining is different to other industries in that it uses and depletes natural resources,” the group said in a statement today.
“Some return on those resources should flow to the Australian public.
“The existing royalty system reflects the fact that it is desirable to levy a charge for access to publicly-owned mineral resources, in addition to normal corporate income tax.”
According to the group, the debate so far has been dictated by misinformation, but the tax did indeed represent effective economic strategy.
“The new tax is fundamentally correct and good,” Fels told ABC Television’s News Breakfast Program this morning.
“This is the best way to tax mining, because the disincentive effects are small compared to the present system of royalties, which are a bad way of taxing.”
Fels said the royalties had acted as a deterrent to production, including marginal production and potential loss-making production.
“If you only tax high-profits then there is still the incentive to produce,” he said.
“Even if you cut into those high profits, the investments still remain profitable and you get an off-set for losses.”
Fels hopes the negotiations between the Government and the mining lobby do not yield drastic changes to the tax.
“In our group, we think it is important that the underlying principle of the tax should be preserved even if there are some adjustments,” he said.
“I think the [40%] rate is about right.”
Minerals Council of Australia (MCA) chief executive Mitchell Hooke said the industry agreed that an increased tax on profits was the right way to go.
He said the MCA had actually tabled a profits-based tax system as part of the Henry Tax Review.
The industry is more concerned about the implementation and design of the tax, he said.