Thursday, March 31, 2011
Professors Henry Ergas and Jonathan Pincus, of Woolongong and Adelaide universities, told a hearing in Melbourne it was inevitable the redesigned tax would disadvantage smaller miners and explorers without profits of the kind the big three had with to offset losses against.
“It will make it difficult for innovators to challenge them,” Professor Pincus of the told the Senate inquiry.
Asked if he agreed the tax as now designed would be especially distorting to those companies not involved in its design, the Adelaide Pincus said he did...
Neither supported either version of the tax, Professor Pincus likening the notion of a tax on super profits or economic rents to that of “a frictionless machine, very useful in theory non-existent in practice”.
John Freebairn of Melbourne University said almost anything would be better than the present state-based mining royalties, which were “about the most distorting taxes you could think of,” costing the economy 70 cents per dollar of royalty collected by forcing otherwise marginal mines out of business.
The big three had received an extraordinarily good return from their campaign to overturn the tax as originally designed.
“If I was BHP or Rio and I had the choice of spending $100 million either lobbying the government to not impose the tax, or on spending $100 million getting minerals out of the ground, it is pretty clear what the best investment would be.”
“Their claims that the resource super profits tax would have caused them to stop investment and cut employment and so on just don’t stand up to scrutiny.”
“Quite the contrary would have happened. The royalty system is a tax on employment and investment - the resource rent tax less so.”
Professor Freebairn believed the Henry Tax Review was far from a wasted effort, nonetheless.
“Ken Henry didn’t really put that report out with a view that everything should be adopted within the next six months or the next term of government. He designed a tax system for the longer term.”
“My guess is that well after Ken has finished looking after hairy nosed wombats his epitaph will say ‘we listened to you Ken’.”
Published in today's SMH and Age
. Mining Tax: Why the media served us badly
. Five easy pieces - the Mining Super Profits Tax
. Wednesday column: We'll still be mining