With her rebadged Resource Super Profits Tax Julia Gillard confirms she has no vision for Australia and that big business cannot and should not be relied upon to look after the common interest.
It is a pea and thimble trick that appears to have fooled the mining companies, but should fool no-one else. The original scheme was supposed to raise $12B in the first year, and this scheme will fall around $1.5B short. So the government has gotten 90% of what it wanted. Or maybe they are exaggerating.
The original proposal was completely opportunistic. It was designed to fill a budget hole and fund some election year giveaways. It dressed this up by claiming that miners were making “super profits” and should be taxed differently from other companies because of this. Or alternatively, that minerals belong to all Australians and we should all reap the benefits.
Both of these points are obviously nonsense. As Phil Ruthven’s figures show mining is no more profitable than other Australian industries. The minerals actually belong to the states, not to all Australians, and the states already charge for the use of them.
By only taxing some companies in the mining sector the revamped tax completely blows away the second argument – apparently whether the rest of us are entitled to the value of minerals depends on who is mining them.
By increasing the threshold to 7% over the government bond rate it doubles what constitutes a super profit, showing it to be a completely flexible ad hoc concept.
When Rudd was first elected I expected the government to be incompetent but benign. Rudd’s record in Queensland was very poor, but what damage could he really do to the national economy?
Now we know. When the Global Financial Crisis arrived he panicked and threw far too much money at the problem. So much that the money is still being spent, over a year after the crisis ceased to be a major problem. In the process he caused all sorts of problems. I don’t need to go through the litany, it’s notorious.
But that is just financial and managerial miscalculation. The mining tax is something else, although its genesis lies in the over-reaction to the GFC and the subsequent need to make savings or raise revenue.
When Australia depends on the rest of the world to fund our projects, making our major export sector severly uncompetitive is wilfully stupid. But it doesn’t stop there. By picking on an industry simply because it was deemed to be both rich and politically vulnerable, it brought not just issues of sovereign risk into play, but called into question the whole moral legitimacy of the government.
One of the foundation principles of our system of government is that all ought to be treated equally. This is a principle which applies most strongly to legal liability, but it also applies in matters of economics. While it is a principle which is sometimes breached, it is normally breached by for example positive discrimination to a specific industry like automotive via a measure like export subsidies.
What is almost unique about this case is that an industry that is involved in a perfectly legal form of enterprise has been penalised so that the proceeds can be given to other industries and individuals.
Even in the bad old days of industry protection I can’t think of anything quite as blatant.
It was modern Labor through the Hawke and Keating governments that entrenched the view that the tax system shouldn’t discriminate between industries, although the first steps were taken by Malcolm Fraser.
So, not only has the Rudd/Gillard mining tax grab trashed the moral legitimacy of the government, but it trashes the entire modern Labor legacy.
It’s not a promising start for the new PM. Rather than a political masterstroke the Mining Resource Rental Tax makes her look like a visionless fixer concerned with wheeling and dealing to stay in power, and nothing much else. We could have expected better.