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July 1, 2010
From the various reports in the mainstream press we know that negotiations between the Gillard Government and the mining industry over the Resource Super Profits Tax (RSPT) are taking place in Canberra. All we know that is the talks have been "constructive and disciplined approach that is being taken by both sides". And that's all. Nobody is talking. No leaks.
What we don't really know is the government's political strategy in dealing with this conflict. Is it one of divide and rule? Where is the in-depth analysis and expert insight that enables us citizens to understand what is happening behind the closed doors and covered windows?
If you dig around a bit then you discover that the Gillard Government is trying to split the industry eg., changing the RSPT so that it would carve out the prospective coal seam gas-fed export LNG projects in Queensland, which would be covered by something akin to the existing petroleum resource rent tax.
Another strategy is to make concessions to the big miners to show that their hostility to that RSPT is unreasonable and self-interested; say by raise the controversial uplift factor in the tax from the government bond rate of less than 6 per cent to the 11 per cent or so.
Stephen Bartholomeusz in Business Spectator states that a political strategy had been developed by Rudd and Swan before Gillard displaced Rudd:
It was designed to fragment the hitherto united industry opposition to the RSPT, isolating BHP Billiton, Rio Tinto, Xstrata and the other big miners and enabling the government to portray them as obdurate and greedy and absolutely committed to not paying a "fairer" share of tax.The mining industry campaign would lose a lot of its potency if the industry’s solidarity was broken and it was being prosecuted only by a relative handful of the biggest players.
Bartholomeusz adds that such a politically driven strategy would be a breach of Gillard’s promise to negotiate in good faith. He adds that the RSPT:
was a just a naked grab for cash, akin to the partial nationalisation of the big end of the sector, largely without compensation, which would have undermined its stability, frozen new projects, decimated the smaller miners and driven capital offshore.
I'm not persuaded by the argument since politics lies at the very heart of these negotiations. The core issue is who runs the country: a democratically elected government or big multinational corporations concerned with their profitability. This is what the big miners have to accept---that here has to be an industry-specific profits-based tax for the public good ---as they press for concessions in their negotiations.
Update
The ABC is reporting that the Government is willing to water down the original deal put forward by former prime minister Kevin Rudd and The Treasurer, Wayne Swan. It says that is understood a deal could include lifting the rate at which the super profits tax kicks from 6 per cent to about 12 per cent and making the rules more generous for existing mines.
We will have to wait until tomorrow. My fear is that the increase in superannuation contribution (lifting compulsory superannuation contributions from nine to 12 per cent) has gone west. Let's hope the changes are to the company tax rather than superannuation. Business should bear the brunt of the miners desire to keep their profits.
Update
The renamed Minerals Resource Rent Tax (MRRT) will apply only to iron ore and coal in Australia, and will be capped at 30 per cent rather than the original 40 per cent proposed. Oil and gas projects will come under the current Petroleum Resource Rent Tax (PRRT) regime to all Australian onshore and offshore oil and gas projects, including the North West Shelf. The new ''super profits'' tax will only kick in when profit exceeds the long-term bond rate plus 7 per cent.This reduces the expected revenues by $1.5 billion.
The deal builds on that hammered out in the final days of Kevin Rudd. Lifting compulsory superannuation contributions from nine to 12 per cent is an important step.
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Yes, I agree completely. Labor supporters should be demanding that the government confront the mining companies in the same way as conservatives confronted unions. But they won't of course - that's the road to socialism! Labor politicians and union leaders got co-opted into the capitalist ruling class a long time ago, despite the efforts of the loopier Australian wingnuts to portray Gillard as some sort of antipodean Hugo Chavz.