The Senate has voted to abolish once of Australia's most controversial tax policies after Prime Minister Tony Abbot secured the support of the Palmer United Party.
Australia’s long-fraught mining tax is set to be scuppered after the Coalition government struck a surprise deal with the Palmer United Party (PUP) to delay the cancellation of a trio of programs in exchange for its support in the Senate.
In order to secure PUP’s assistance in overturning the mining tax, the Coalition agreed to retain the school kids bonus, the income support bonus and the low income superannuation contribution until the next election.
The Senate decision is a major coup for the Coalition government, who have long vowed to scupper the mining tax, given that passage in the lower house is now considered a fait accompli,
“The government has delivered on our commitment at both the 2010 and 2013 elections to scrap the failed Mineral Resources Rent Tax,” said Treasurer Joe Hockey and Finance Minister Mathias Cormann in a joint statement. “The tax package was so poorly designed, it was in fact costing the government billions of dollars each year.”
The Coalition claims that the annulment of the tax will increase the net savings forecast in the budget to more than $10 billion over forward estimates.
The Senate decision brings an end one of the most controversial policies in recent Australian history – one which aroused the collective ire of the resources sector and spurred a mutiny against Prime Minister Kevin Rudd which led to his abrupt topping.
In its original form as the Resource Super Profit Tax (RSPT), the mining tax sought to grab a 40 per cent share of revenues from the extraction of all non-renewable resources, including gold, nickel and uranium exploitation.
In response to the RSPT the mining sector launched a $22 million “ad war” against the government in May 2010, which contributed to the ousting of Prime Minister Kevin Rudd just a month subsequently.
The Minerals Resource Rent Tax (MRRT), a replacement for Rudd’s RSPT introduced by Prime Minister Julia Gillard on 1 July 2012, levied a tax of 30 per cent on the “super profits” accrued by iron ore and coal miners once their annual profits hit the $75 million threshold.
This watered-down version of the mining tax as originally envisaged by Rudd continued to be strenuously opposed by many members of the mining sector – particularly more modest players such as Fortescue Metals, which launched a lawsuit against its constitutionality in 2012.
The tax also drew scathing criticism once implemented for its inability to generate significant revenues, as well as the exorbitant cost of its implementation.
Huge multinational miners such as Rio Tinto, BHP Billiton and Xtrata, whose ability to draw massive profits from the country’s natural resource endowments without making corresponding tax contributions still sticks in the craw of many Australians, managed to dodge much of the MRRT due to the complexity of a tax code which they themselves played a key role in crafting.
While the May 2012 budget originally envisaged $3 billion in revenue from the mining tax, by October 2012 this figure had already fallen to $2 billion. Government receipts from May 2013 revealed that the MRRT would raise just $200 million in its inaugural year – a paltry sum compared to the original projection.