Integrity on line in taxing times Terry McCrann From: Herald Sun December 22, 2010 12:00AM
RESOURCES Minister Martin Ferguson has stuck a savage blow - to two of his mist senior colleagues in Canberra. He's savaged both the political judgment and the policy integrity of his own prime minister Julia Gillard and the treasurer and deputy prime minister Wayne Swan in an extraordinary way.
Ferguson has signed off on a document - without qualification - that states effectively that Gillard and Swan are either incompetent or deceitful or really some combination of both.
This conclusion is not denied by the fig leaf which the report from the so-called Policy Transition Group tries to throw over the controversy over state royalties on mining companies and the federal government's proposed resources tax (MRRT).
In order to 'solve' - actually, only postpone - one of the three big disasters plaguing the preceding Rudd(-Gillard) government, incoming PM Gillard did a deal with the mining industry.
Again, actually, she didn't do the deal with the industry as such but only with the very big end of town - BHP Billiton, Rio Tinto and Xstrata.
The absolutely critical part of the deal was that all state royalties paid by mining companies would be credited against their MRRT liability.
If she - and Swan - had not made that promise the big three would not have called off their advertising campaign against the tax and the Gillard-Swan government.
Then, after the election, the government said that only royalties in place at the time of the announcement of the amended tax would now be credited. Plus any future royalties that had been announced at that time but not yet implemented.
Gillard and Swan welched on a specific promise. Further, they have both emphatically denied it was ever made, against the utterly undeniable written commitment they gave.
In Gillard's own words: "There will be no carbon tax under the government I lead."
Oh sorry. That was the other lie, designed to bury the second big disaster plaguing the Rudd-Gillard government. The third being, of course, the promise to stop the boats.
Now one of their own cabinet colleagues in Ferguson has called them on their lie. The Policy Transition Group, which he co-leads with former BHPB chairman Don Argus, "recommends there be full crediting of all current and future (my emphasis) state and territory royalties under the MRRT".
The use of the word "recommends" is a fig leaf, to modify the clear repudiation of Gillard and Swan. It's not something new. A more accurate word would have been "endorses" the promise already made.
Further, the Ferguson-Argus report went on to again "recommend" that the federal, state and territory governments put in place "arrangements to ensure that state and territory governments do not have an incentive to increase royalties on coal and iron ore".
This was both further fig leaf over Gillard and Swan's incompetence/deceit, and also a shovel to try to dig them from the deep hole they've dug for themselves and the government.
For very simply they could have created a big new tax which could end up generating zero or close to zero revenue for Canberra. And which, of course, explains why they welched.
If they'd stuck to their initial promise, states could just increase their royalties to soak up whatever the MRRT might have raised. Because they are different taxes it wouldn't be exact. But states could certainly get most of the money.
And, in a very basic sense, why wouldn't they. After all, they are actually the states' resources that are being taxed; and people keep saying the states don't have appropriate growth taxes. Here's a nice one.
So although Ferguson (and Argus) have thrown Gillard and Swan a couple of fig leaves, they have nevertheless left them up the creek without much of a paddle.
All they can do is to try to persuade the states to promise not to increase their royalties, to leave the money for Canberra. But why should the three ones that matter do so? Western Australia, Queensland and New South Wales.
WA speaks for itself. This is an opportunity for Colin Barnett to cement a Liberal state government for years, if not decades.
It would be suicide for the NSW Labor government to cave to Canberra. Except, of course, an already dead government can't actually suicide. But in any event I doubt that the next Liberal government is going to hand over money to Canberra.
If Anna Bligh in Queensland did she would turn what is already going to be a nasty defeat into a NSW-level obliteration.
This was supposed to be the 'easy' one of Gillard's three big promises before the election. It's now a complete debacle, with a really big new tax that will directly hit every Australian coming behind.
Perhaps she should pop across to East Timor and start digging.
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