If one relies on media reports it would appear that the Australian mining industry might have a case against the Rudd Government's proposed Resource Super Profits Tax which is due to activate in 2012.
The RSPT will replace the crude oil excise, and operate in parallel with State and Territory royalty regimes and Under the RSPT a refundable credit for royalties paid to State and Territory Governments will be available.
However, if one cares to open the media releases put out by the Mining Council of Australia the flimsy nature of arguments used by the anti-RSPT lobby begins to emerge.
To date my favourite assertion is; The super tax is, in effect, a Government-mandated sale of 40% of Australia's resources industry at a Government mandated price.
Another favourite is the statement that; For the industry as a whole in 2007-2008, ATO statistics show mining companies paid 27.8% effective corporate tax rate, which rises to 41.3% when royalties are included.
While Mining pays a higher tax rate than any other industry stands out as a blatant attempt at misdirection.
All these quotes are found in the Mineral Council's The truth about the super tax –the myths and the facts, 25 May 2010.
So let's look at the forced sale argument.
No established mining corporation is talking of selling off the parent company or subsidiaries - in the middle of a resources boom most of these companies are very profitable and likely to continue so for many years even with mooted tax reform.
The only threats being made by some mining companies is that they will reassess their scheduled mining projects in light of the proposed tax and rebate scheme.
What about that colossal corporate tax rate quoted, I hear you ask.
Well in 2007-08 there were according to the Australian Taxation Office 2007-08 statistics; 4,290 mining companies having combined incomes which totalled $160,323,192,189, which in turn had combined taxable incomes of $29,010,243,407 and net tax actually paid was $8,068,463,15 after all allowed deductions had been made.
As for royalty payments made in Australia these added up to $3,924,902,975 in 2007-08, which was a little over half of all royalty payments across all listed industries made in that financial year. (Update: A hat tip here to Peter Martin for pointing out in a recent post that mining royalties are tax deductible)
What the Tax Office also points out is the fact that of these 4,290 mining companies there were some who paid no tax at all and, these comprised 68.3% of all mining companies.
In fact the mining sector has the second-highest percentage of 'no tax paid' than any other listed industry.
How did they do that?
Well there are at least 20 deductions, rebates, concessions, exemptions, offsets etc. available to the mining industry and their combined value is literally worth billions.
The industry total for expenses claimed under R&D concessions alone was $2,508,321,897 and immediate deduction for capital expenditure $3,785,347,506, in 2007-08.
So how does the claim that the mining industry is paying a higher tax rate than any other industry fare?
Quite frankly the mining industry tax rate does not stand alone from some other listed industries in terms of comparable tax percentages to taxable income.
It is worth noting that in 2007 the Business Council of Australia in Tax Nation calculated corporate tax (as a percentage of profit) at 20% for the mining industry.
Interestingly this same document stated; Taxes Collected are negative for the mining industry group because as major exporters survey participants reported a significant GST refund which more than offset other Taxes Collected.
It is also interesting to see that the Mining Council of Australia's advertisement presently being broadcast states that the mining industry currently pays 38% tax, which is a figure significantly lower than those quoted in other council documents which had the combined company tax and royalties running at 41.3%.
Next time you see a talking head spruiking for the mining industry or catch one of the industry's televised advertisements - remember that all is not as these miners would have you believe.
Image from Mumbrella
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