Both sides are appalling in resources tax debate

 

So, this is what passes for informed debate. It's a little over a fortnight since the federal government announced its much heralded plans to introduce a resources rent tax (since renamed a resources super profit tax) and the entire affair can now officially be regarded as a circus.

It is amusing to see the likes of Fortescue Metals founder Andrew ''Twiggy'' Forrest and BHP boss Marius Kloppers portrayed as brothers-in-arms after years of acrimonious disputes over rail and port access, yet there is a surreal and rather distressing aspect to watching the debate go off the rails.

Meanwhile Ken Henry, the studious head of Treasury and a man little known outside the arcane world of the Canberra econocracy, has been portrayed as the evil doctor, intent on wreaking havoc on the nation's export industries, depriving Aussie kiddies of a future and destroying our international reputation.

We've been bombarded by a series of ludicrous claims from bellicose mining chiefs that have only served to debase what should be legitimate concerns from the mining industry.

Yesterday, Rio Tinto boss Tom Albanese - the man who almost blew up the company and wanted to hand control to the Chinese government - claimed Australia posed a greater sovereign risk than any other country in which Rio operates. That's a rather bold claim, particularly given Rio ''lost'' a sizeable share of the giant Simandou mine in Guinea, in West Africa, a few years back when the government decided to simply resume it.

Last Wednesday, Andrew Forrest - the nation's richest man, whose company has paid very little tax until now because it has been in development phase for most of its life - claimed the tax overhaul had placed 30,000 jobs in jeopardy as he would be unable to gain finance for two major mining developments.

Over the weekend, he downgraded the job losses to 20,000; still a lot of workers to be sure but a substantial change on the previous week's estimates. Both projects, it should be realised, have yet to be approved by Fortescue. One was due to be evaluated next year, the other years down the track.

Forrest undoubtedly is a man of boundless energy and gritty determination, matched only by his capacity for hyperbole. His optimistic projections for his company during its early phase consistently overshot reality. It is a fair bet his current comments are equally weighted to deliver a result in his, and his company's, best interests.

As the lobbying predictably escalated to fever pitch, the performance from our parliamentary leaders has been equally appalling. The Treasurer referred to some miners as ''fundamentally dishonest'' while the opposition yesterday attacked a research paper put forward by the government as ''the shonkiest work you've ever seen''. Talk about getting off the point.

The entire episode, coming as it does immediately after the canning of the emissions trading scheme following an equally intense lobbying campaign by the mining industry, harks back to the mid-1970s when the federal government decided to slash import tariffs.

Again, a Labor government. Again, it was accused of being anti-business. But that move opened up our economy, improved competitiveness and productivity and created the impetus for capital and labour to shift into high-value export production such as mining rather than competing against imports under a cosy protectionist umbrella.

Three important points need to be taken into consideration. The first is that mining companies do not own the resources of this nation; they merely are given a lease to exploit them. The second is that mineral resources are, by their very nature, finite. They are non-renewable and as a nation we get just one chance to maximise our benefits from them. And the third is that in the past decade, the big miners' profits have risen astronomically.

Increasingly, the benefits of the resources owned by Australian citizens are accruing to the shareholders of mining companies, not to the nation as a whole. It is a simple fact and one that cannot be disputed.

That is not to say that the federal government has chosen the correct model. And its ''consultation process'', where almost every critical issue is off the agenda, clearly is a joke, serving only to back the government into a corner and inflame a cashed-up opponent spoiling for a fight in an election year.

The sole beacon in this tawdry episode is Professor Ross Garnaut, whose learned and measured response to both sides should be applauded. He is the architect of the resources rent tax on our offshore oil reserves, a system that works. And there has been no shortage of capital invested in the energy sector since its inception.

There are some key differences in the Henry scheme and that operating in the offshore oil and gas industry. The petroleum tax allows expenditure to be written off in the year it is incurred and, if losses accrue, they are accumulated. The tax kicks in at 5 percentage points above the bond rate.

The system proposed by the government allows for a repayment to the government in the event of losses at the 40 per cent tax rate with the royalty kicking in at the government bond rate. There are noises in the mining industry that it would prefer a new tax more along the offshore lines.

This is a debate too important to be hijacked by those who stand to benefit most from maintaining the status quo.