Up to two weeks ago BHP & Rio were paying the WA Government 3.6% royalty on Iron ore fines. As you would appreciate these two make up over 80 of our iron ore exorts. This a 2% concession on the standard WA rate.They were shamed into paying the full rate by Premier Bartlett as a prerequisite to WA agreeing to the proposed integration of both iron ore production facilities in the Pilbarra.
Now let us look at the tax sum:-
Iron ore FOB West Australia spot price $140/ton
Cost FOB $ 40/ton
Gross profit $100/ton
WA Royalty @ 3.6% (up to two weks ago) $ 3.60/ton
Gross profit after royalty $ 96.40/ton
Crikey mate, who's ripping who off?
As an Australian with a keen sense of fair go and fair play I think that this rate of royalty is a scandal and the type of tokenism which the multinational miners are trying to feebly defend.
As an Australian, and I assume that you are, what do you consider is fair?
Bear in mind that the state of WA owns the minerals in the ground amd that if we believe the Communist China Story, they will need our iron ore for decades.
That's the bottom line to the whole RSPT debate , comrade!
Personally I think that Labor should not be imposing a profit based tax in lieu of the current State royalties based on % rate per ton.
The State system is far superior because it cannot be rorted by transfer pricing by the multinationals or double invoicing which can radically reduce Australian profit and realise it elsewhere.
My suggestion is to raise state royalties on Coal & Iron ore (which are coincidentally about the same FOB value and cost) to 10% of the first $100 & 20% thereafter.
Now lets look at the simple sum again
FOB $140/ton Cost FOB $ 40/ton GP $100/ton New Royalty $ 18/ton (ie 10% x $100 + 20% x $40) Profit after Royalty $ 82/ton (Thats a fair go)
Just do the sum on iron ore and coal alone and that's alot more than the proposed $9.4 billion from the proposed RSPT!
What's more its simple, understandable and rortproof.
I know that the Chinese would not like it but, let's face it, the Chinese , like RIO and BHP in the past, the Chinese Government would want to steal it if they could.
And like a previous poster said, it would be good to deposit at least half of the take into the Future Fund. It would keep Costello happy because he has a job for "one of the boys" there.
I know that this kind of resolution hasn't got the political wedge of the RSPT, but if we do not opt for commonsense solutions then we will get the warped politicians we diserve who will sell us out for a term in power! And either side is capable of that.
