Have a read of this, ONE of Australia's most respected economic forecasters, Chris Richardson, has demolished the intellectual and economic modelling behind the government's resource super-profits tax, effectively telling Treasury it got it badly wrong.
Mr Richardson, chief of Access Economics, said the tax would slow the development of new projects and while minerals might not be mobile, investment in them certainly was.
He said the prospect of the tax raising mining output -- as the Henry review predicted -- would take 50 to 100 years and would occur only once Australia had returned to its initial relative position on the global cost curve.
The assault on the fundamental logic of the tax will seriously embarrass the government and the architect of the tax, Treasury secretary Ken Henry, given their repeated claims that their model will not deter investment and the mining industry is merely running a fear campaign.
According to Mr Richardson's analysis, this also presents a very big problem for investors. He said that as a result of the new tax, the effective tax rate for Australian shareholders paying the top personal rate would be 67.9 per cent.
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"Even superannuation funds -- otherwise lightly taxed -- will pay marginal rates ranging from 40 per cent to 49 per cent. The matching additional marginal tax rate paid by foreign investors will be up to 80 per cent and could be more."
Mr Richardson, in a speech to the Minerals Council of Australia, said the tax would slow greenfield development by cutting the return for Australian development.
"Miners -- indeed all businesses -- put their money where after-tax returns are highest," he said. "As the RSPT more than doubles the tax take in royalties, that affects after-tax returns on greenfield mines."
This would push investment in greenfield developments to countries such as Canada, Indonesia and Brazil as substitutes for what was to be a very highly taxed activity in Australia.
Enthusiastically received, Mr Richardson targeted the modelling done by Econtech, saying it was implicit in this that there was no difference between resource rents and super-profits.
"There is no practical way to isolate 'rents' on minerals from the effort to extract them," he said.
"The upshot is that miners are being taxed on some of their normal profit as well as any super profit. That's a problem. Any income that's not resource rent but is taxed as though it is will become among the most highly taxed types of income in Australia."
Mr Richardson also warned that the tax ran the risk of producing a "perverse outcome", delaying Australian mining development for moderate returns to the public, despite notably increased taxes on the profits of miners. His argument undercuts the claim that it will preserve more of the benefits of mining for later generations.
