YOUTH VOICE: My Take on the Resources Super Profits Tax

Posted on August 18, 2010 by


BY GALVIN DUNLOP.

The Resources Super Profits Tax (RSPT) was a proposal put forth ex-Prime Minister Kevin Rudd, and was listed as one of the recommendations by the Henry Tax Review. The new tax proposed a capped total taxation of 40% on mining profits to replace the current mining royalties’ tax.

Let me highlight some of the features of Rudd’s super profits tax:

“Of this $12 billion in revenue, $700 million will be used to set up a Resource State Infrastructure Fund in 2012–13, with another $735 million budgeted for the fund in the following financial year. When announcing the fund, the government estimated that it would constitute ‘more than $5.6 billion over the next decade, particularly for mining states’.”

“In addition, the government has set aside $1.8 billion over four years for a resource exploration tax offset which will be available for expenditure incurred from 1 July 2011.”*

The aim of this tax was to obtain revenue for the state from the resources sector with one simple tax, abolishing a number of other more complicated taxes in the process. The government stated that deductions would be allowed “for the cost of extracting resources and getting them to the taxing point, but not for the following types of expenditure:

▪ Payments of interest and financing costs, including the cost of issuing shares, the repayment of equity, the payment of dividends, and financial hedging costs;

▪ Payments to acquire an interest in an existing exploration permit, retention lease, development licence, production licence, pipeline licence or access authority;

▪ Payments to acquire interests in projects subject to the RSPT; and

▪ Payments of income tax or GST.”*

The RSPT was one of the key factors leading to the downfall of Prime Minister Kevin Rudd. This begs an important question: who really runs Australia?  Is it the mining giants?  CEO’s and directors of multinational conglomerates are reaping the benefits of Australia’s natural resource endowment, a natural resource that belongs to every Australian. Once an ore is mined, it doesn’t grow back.

What disgusts me is that the general public (shown in the AC Nielsen Polls) did not support this tax reform.  One of the concerns that many people had, and which the mining giants played on, was the possibility that mining companies would take their operations elsewhere.  My response is, so what?  Where else are they going to find the world’s second largest iron or e-reserves, and the world’s largest uranium reserves? I’m not sure. Australia is one of the few countries with such a fantastic natural resource endowment.

The funds generated by the RSPT could have secured Australia’s future and ensured that the mining sector remained steady and competitive. This window of opportunity has closed and the mining executives are enjoying the benefits of an increased salary from our resources.

So the result of the RSPT was the downfall of Kevin Rudd. Julia Gillard’s proposal is a slightly watered down version of Rudd’s RSPT. However this Saturday if Tony Abbott wins office, he will abolish the tax.  So who is going to pay for the debt which we have accumulated over the recession?  Under the Abbott government we all will.  We will pay for the debt in an increased grocery tax. Meanwhile the mining executives will comfortably sit in their multi-million dollar palaces laughing while ordinary Australians pay more tax!  That is what equal wealth distribution will mean under Tony Abbott.

* Source: http://www.aph.gov.au/library/pubs/RP/BudgetReview2010-11/TaxationRSPTax.htm

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Galvin Dunlop is studying politics as part of a Bachelor of Arts at Latrobe University, Albury-Wodonga campus. He works in the telecommunications industry and is also working as a tutor in local high schools.

The views in this story are those of the author and not necessarily those of Our Voice: Politics Albury-Wodonga.

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