Thursday 1st July 2010
What’s the real story on the Resource Super Profits Tax? How will it affect your super? And what are the consequences for health funding?
The 2010 budget and the Henry Tax Review saw several initiatives from the Federal Government that will be to the advantage of nurses.
The increase in the Superannuation Guarantee Contribution from 9% to 12% in particular will do much to improve the security in retirement of nurses. There is also the $7 billion increase in funding that the Federal Government has committed to the health sector this year.
These welcome advances could be in jeopardy if the campaign against the Resource Super Profits Tax by the powerful, cashed-up mining companies is successful.
The Federal Government’s super initiatives would boost the retirement savings of 3.5 million low-income earners by $830 million. ACTU modelling shows the Government’s measure would deliver an extra $108,000 in retirement for a full-time worker earning average full-time wages.
The Government’s package also includes other improvements in retirement income. Low-income workers will receive a super contribution of up to $500 a year. Workers aged over 50 with less than $500,000 in super will still be able to contribute up to $50,000 per year to tax-preferred super.
All this is threatened by the mining companies’ campaign to scuttle the tax.
Social services such as health could also be collateral damage from the miners’ campaign. The revenue generated from the Resources Super Profits Tax will free up funds in the Federal Government’s consolidated revenue for health.
NSWNA General Secretary Brett Holmes said Australia has an urgent need for increased investment in infrastructure and there is a compelling argument for the mining sector to pay more tax.
‘The Resource Super Profits Tax will take back some of the enormous windfall profits multinational mining companies have been making out of the commodities boom and invest it in Australian workers’ superannuation, social services like health and in skills and infrastructure to diversify our economic future,’ he said.
The real reason for the mining companies’ fury at the RSPT is that it will set a global standard for taxing mineral profits, according to commodities experts.
Citigroup analyst Craig Sainsbury told Bloomsberg that Canada, Peru and Chile could be the next countries to introduce a similar tax.
India and China have already flagged they will be looking at taxing super profits instead of the current practice of levying the volume of minerals mined.
The tax may also prompt European and Scandinavian countries to seek a greater share of revenue from production according to Magnus Ericsson from the Raw Materials Group, a mining data and analysis company.
Mark Johnson, Chairman of AGL Energy
‘I think the Henry Review makes a very respectable, intellectual case for that tax. The fact it has been used successfully for hydrocarbons in Bass Strait for 20 years shows it can work and everyone can come away satisfied.’
Roger Corbett, Reserve Bank member, Fairfax Media Chairman
‘We should be taxing them sufficiently to ensure that one of these days when the coal and iron ore is consumed we have something left for it.
Bernie Fraser, former head of the Reserve Bank of Australia
‘I am amazed there has been such vocal opposition. It is very much in the national interest for a greater share. Even under the present arrangement the Government is talking about leaving 60% of the super profits with the mining companies.’
Ken Henry, Secretary to the Treasury
‘It is the strong and clearly stated view of Treasury that the Resource Super Profit Tax will grow the mining sector and the economy. The tax was constructed on that basis, and the modelling released with the package clearly demonstrates it.’
David Buckingham, former Executive Director of the Minerals Council of Australia (the mining companies’ national peak body)
‘The balance over time is likely to see an escalation in investment, a growth in jobs, a growth in exploration activity, not as some of the more hysterical commentators are suggesting, withdrawal.’
Paul Howes, Secretary Australian Workers Union
‘The hysteria from mining magnates is rubbish. Mining is hugely profitable in Australia. Iron ore prices have rocketed by around 170% per dry metric tonne in the 12 months to May, 2010. Rio Tinto – and no other mining company – is not going to turn its back on that reality. And if they do, there will be 100 companies behind them willing to take their place.’
Tony Maher, CFMEU Mining Division
‘These super-profits are the result of a booming market which none of the mining companies have done anything to create. They just happen to be digging out the resources that belong to the Australian people at a time when prices for these commodities are doubling, tripling and surging by even greater amounts.
Mining companies pay royalties to access the minerals owned by all Australians. It is the equivalent of a manufacturing company paying for raw materials before they start making products. They then pay tax on their profits like all other companies.
Mining companies claim they are now paying 35% of their profits in tax.
Treasurer Wayne Swan said that this figure lumps together the amount they pay for access to the minerals and what tax they pay on their profits.
‘Very few businesses receive as their primary input the non-renewable resources that belong to the Australian people,’ he said. ‘No other business would try to argue that they should get their primary input for free, courtesy of the Australian people just because they pay company tax, and neither should Australia’s largest mining companies,’ he said.
The effective tax that mining companies pay on their profits when you remove the royalty payments for access and the very generous tax concessions that are funded by Australian taxpayers is 13% for overseas companies and 17% for domestic companies. This is well below the 30% paid by companies in other sectors.
Until now, mining companies have been paying royalties based on the volume of minerals they mine, not the profits they generate. Over the past few years the rapid growth of the Chinese economy has seen a profit bonanza for minerals, which has all gone to the mining companies. They are still paying the same amount in royalties for the minerals although the prices for these minerals have gone through the roof.
In 2006–2007 mineral production totalled $100 billion, of which the Australian people, who own the resources, received little more than 7% in tax revenue.
The biggest mining companies are predominantly overseas-based multinationals. Rio Tinto is only 15% Australian owned and only three of the 15 directors live in Australia. BHP-Billiton is 40% Australian owned and only four of the 12 directors are from here. Both companies are now based in London.
The Government argues the Australian public should be sharing in these windfall profits. In this year’s Budget it said it would use the extra revenue from this tax to boost Australian workers’ retirement incomes and to cut company tax. This would help diversify the economy so Australia is less dependent on mineral exports and have a more sustainable future.
The Federal Government’s Resouces Super Profit Tax has come under intense fire from an industry hell bent on keeping all of their massive profits. Here’s what the mining companies are making:
A hard-working nurse earns a fraction of the massive incomes of mining magnates