There was, and is, a fundamental disconnect between the terms of trade boom that was killing manufacturing and tourism and the tax revenue governments were getting from it because royalties are levied on volume not price.
The Henry proposal involved a 40 per cent extra resources rent tax and a reduction in company tax to 25 per cent, plus a series of depreciation and capital allowance benefits for manufacturers and other small businesses.
Now, that particular reform wasn’t ever posed by Rudd, but something very much like it existed, however briefly, before the miners took a hatchet to the government. It’s only now that the majority of people are starting to see the two-speed economy for what it is.
.Julia Gillard negotiated a lower tax on iron ore and coal with BHP, Rio Tinto and Xstrata so that only the smaller companies with smaller advertising budgets would complain. As part of that, she was forced to allow existing mineral royalties to be deducted from the tax, which totally negated the idea of replacing ad valorem royalties from a tax on profits.
And then, to make the whole exercise completely pointless, she tied it to an increase in the superannuation guarantee levy from 9 per cent to 12 per cent.
That increases manufacturing costs instead of reducing them, and vastly increases the cost of the exercise to the federal budget.
According to Brian Toohey in this morning’s Financial Review, the cost to the budget of the extra superannuation tax deductions will be $4.2 billion in 2019-20. The total cost of the concessions connected to the MRRT will be $9.4 billion in that year – less than a third of which is paid for by the revenue to be collected from the MRRT.
The latest concessions negotiated by Andrew Wilkie undermine any credibility he had – his electorate in Hobart doesn’t have any mining interests, so his conditions on improving things for small miners is clearly the result of targeted lobbying. Oakeshott and Windsor did well for their electorates, raising the issue of Coal Seam Gas – but Wilkie betrayed the idea of the independent representative.