Taxing the rich to give to the rich

After months of relentless propaganda by mining companies and the corporate media, the idea of taxing the super profits of the big mining companies remains a popular measure. According to Essential Research polling, 51% support such a tax (up from 50% since July 2010) while opposition only rose from 28% to 33% .

According to Bernard Keane, writing in Crikey.com “there is strong support for the idea that the tax will keep mining profits in Australia instead of losing them offshore (57% agreement), for the idea of companies paying a “fair share” of tax (62%) and that all Australians should benefit from resources that belong to all Australians (67%).

What people want is the government to have the courage to do a Robin Hood and take from the corporate rich to give to the poor.

We have seen the massive profits that the big mining companies and the big banks have made – even through the global financial crisis. The fact that the proportion of the mining profits paid in royalties and taxes has fallen by more than a third of what it was in 1999 according to Treasury calculations in May 2010 has only rubbed salt in the wound.

We know about widespread corporate tax evasion.

“In Australia there are more than 1000 businesses with an annual turnover of more than $250 million,” wrote Adele Ferguson in the November 21 Age. “The problem for the ATO and the government is that tax collections have hardly budged in the past few years and, between 2005 and 2008, more than 40 per cent of all company income tax returns lodged by big business taxpayers paid no tax. Of those, 20 per cent made a profit.”

So should we be celebrating the passing of the Gillard Labor government’s Minerals Resource Rent Tax (MRRT) and the extension of the Petroleum Resource Rent Tax (PRRT) through the House of Representatives on November 23?  Are these really “historic reforms to lock in the benefits of the mining boom and deliver a fair return from the development of the nation’s resource wealth” as the government claims?

Hardly.

First, the MRRT is a watered down version of the original mining super profits tax proposed by the Rudd Labor government in 2010. It has been reduced from a 40% to a 30% tax on super profits (defined as profit over 6%) of only some big iron and coal mining companies. Actually it is an effective rate of 22.5% when special mining industry tax allowances are taken into account. The tax was going to cut in on companies making profits of more than $50 million but instead, at the insistence of independent MP Andrew Wilkie it will fully cut in for companies making only $125 million profit a year.

But the biggest problem is that all the proceeds from the MRRT are earmarked to go back to other sections of the corporate rich. The bulk of the proceeds will fund a cut in the corporate tax rate from 30% to 29% and compensate business for higher payments into compulsory worker superannuation funds. The original Rudd government version would have extracted more tax from mining companies but also delivered corporate tax rate deduction to 28%.

Other promises were made by the Gillard government, such as a popular $200 million to fund research into the environmental impacts of coal seam gas developments, but these will probably have to be funded by future budget cuts.

So it is not just a case of taxing some of the corporate rich to give to others of the corporate rich, by the time the whole package is revealed it could also involve cutting public services and public sector jobs to give to the corporate rich.

The Greens supported this dodgey bill on the promise that an identified $100 million gap between projected MRRT income and the promised redistribution to other business sectors would be covered by delaying a tax concession to the banks but there is a strong possibility that more gaps could emerge.

Greens leader Senator Bob Brown has conceded there are problems with the MRRT but promised to try and amend the legislation when it goes before the Senate next year.

“The Greens want a fairer mining tax and our focus, all the way down the line, has been on improving the mining tax. There is further work to be done when the bill reaches the Senate and, remember, government legislation covering the separate tax break for big companies is yet to be introduced to Parliament,” Brown said.

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