After 2 months of fierce struggle, highly expensive ads and the election of a new Prime Minister (PM), the Federal Government and the resources industry have finally reached an agreement on the now scrapped RSPT.
One can wonder if it has resulted into a win-win situation or, given the new neutral name of the tax, if the resources industry is not the main winner of the deal. Is the glass half full or half empty?
From a political point of view, the MRRT appears to be the first victory of Julia Gillard’s new role as Prime Minister. Her ability and her efficiency in leading negotiations surely took a weight off the Labor Party’s shoulders for the election now being held on August 21.
The original RSPT was definitely too disconnected from the way market works whereas the MRRT shows far more respect for market conditions.
However, it appears that former PM Kevin Rudd was close to an agreement and that Julia Gillard only had to seal the deal, probably with larger concessions. So her victory has somewhat of a bitter taste for taxpayers.
From Rio Tinto’s, Xstrata’s and BHP Billiton’s point of view, the MRRT is a genuine victory. Indeed, Gillard’s Government has conceded on:
- Lowering the rate of the tax from 40% to 30%.
- Raising the rate at which the tax applies from 6% to 13%.
- Removing the retroactivity of the tax.
- Applying the MRRT only to iron ore and coal mining companies.
This is good news for big mining companies - especially for those that extract gold and base metals - and testifies of their strong lobbying power on the Federal Government.
On the other hand, medium and small mining companies have lost out given that they were not part of the negotiations.
In the end, the resources industry will have to share a bit more of its colossal profits, logically enough for the Federal Government to help, finance its flagship projects (the national broadband network, climate change, etc.) and lay down a stronger tax base during the resources boom.
The MRRT will enable a better distribution of wealth among Australian people, which was the primary goal of taxing the resources industry. But picking who won the debate seems a fairly simple task - just ask Rio Tinto or BHP. They can hardly contain their delight to have, again, emerged into positive territory.
Arnaud Eard
Arnaud comes from Paris and gained a MA in International Political Economy at the University of Sheffield. He has been interning at Bluegrass Consulting since May 2010.
