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The mining tax has been abolished after a deal with the Palmer United party (PUP) in which the government delayed the abolition of the schoolkids bonus and other savings and deferred already-legislated increases to workers’ compulsory superannuation for seven years.
The prime minister was jubilant after the shock deal was revealed, claiming it rendered the Labor party irrelevant and proved the government – approaching the first anniversary of its election – was “getting on with the job.”
After secret negotiations with PUP, the government revealed a deal with the crossbench senators to finally abolish the mining tax – as it had so often promised – if it retained three programs until after the next election, instead of abolishing them straight away.
In changes that will cost the budget bottom line $6.5bn over the next four years but leave it no worse off in the long term, the government has agreed to keep the schoolkids bonus, the low income superannuation contribution and the income support bonus until 2016 or 2017.
But it will also freeze the amount employers are compelled to put into all workers superannuation accounts. It is currently legislated to increase to 10% in 2015-16 and then by 0.5% each year to reach 12% in 2019-20. After this deal goes through it will be frozen at 9.5% and won’t reach 10% until 2021, rising by 0.5% a year after that.
Well by my reckoning that is another victory for the Coalition government in their campaign to undo the follies of Labor, which means that we will no longer have a tax that costs more to administer than it collects which makes us a laughing stock to the world. Further the suspension of increases in superannuation will be greeted with great joy but those in our economy who provide the employment, it will mean that the cost of hiring someone will be less over time which should help business to employ more people. Personally as I have two children in school the continuation of the school kids bonus will come in handy but I very much doubt that it has ever been a game changer to parents in this age of voter cynicism. As Tony Abbott said yesterday in the Parliament this is not everything the government wanted but it will do.
What this means is that the government has actually achieved the three planks of its election campaign, the Carbon Tax has gone, the Mining Tax has gone and the Boats have been stopped, more importantly though this demonstrates that for all of his bluff and bluster in the media Palmer can be dealt with and the government can bring about the reforms that it was elected to do.
I was going to write about the failure of the Labor government to come anywhere near its expectations for the MRRT but instead I post a Joe Hockey news conference where he is right on the money .
- No pavlovas for Wayne and Julia, or the abject failure of the MRRT (iainhall.wordpress.com)
- PM Gillard rejects changes to mining tax (news.com.au)
- Mining tax takes ‘massive hit’, raises $126m (news.com.au)
- Mining tax raises $126m (smh.com.au)
- Super plan to hit low-wage earners (news.com.au)
- Swan should resign over MRRT: Hockey (bigpondnews.com)
The old aphorism about the number of chickens from their precursor eggs that should have served as a source of wisdom for Wayne Swan and his peons in treasury. The fact that he had already planned a virtual feast of omelettes, sweet custards and ostentatious pavlovas from the proceeds of his mining tax demonstrates that both he and his mistress in the lodge really haven’t got a clue about the difference between their wild imaginings and the reality of the economic environment.
Only The ALP under the leadership of Julia Gillard can create a tax with such fanfare and then have it collect no revenue at all. Frankly there is one simple upside to this and that is the abolition of this badly designed tax will actually improve the government balance sheet because the commonwealth will save on the administrative costs that it has created and there will be no revenue losses to be made up elsewhere because this tax collects no revenue.
At every possible level its a very big Labor fail
One of the most damaging issues of the public perception of Labor prior to the last election was caused by the very vociferous media campaign from the mining industry about Labor’s intention to impose a new tax upon their business. You have to give Gillard a nod of respect for managing to convince them that they were better off “doing a deal” rather than continuing to campaign against Labor’s tax plans and putting their faith in ousting a first term government so that the coalition could fulfil its promise of NO new tax at all. When the result was finally known there must have been some very loud gnashing of teeth in the board rooms of BHP Billiton and Rio, when they realised that had they not lifted the lead out of Gillard’s saddle bags we could have a different government and their bottom line would not be so exposed.
Now they must be doubly bitter to discover that Gillard’s deal is unravelling and that they won’t be replacing one tax with another and it is likely that they will just be screwed by another level of government.
BHP Billiton and Rio agreed in June to pay an extra $1 billion in iron ore royalties to Western Australia over the next four years, but there is now doubt over whether this will be returned to miners under the planned MRRT regime.
West Australian Premier Colin Barnett said he reserved the right to jack up royalty rates in future.
The Prime Minister told parliament yesterday she would not allow commonwealth revenue from the MRRT to suffer by allowing the states and territories to increase mining royalty rates.
“In implementing the mineral resources rent tax, we obviously won’t be giving a green light to state and territory governments to increase their royalties in a way which means the federal government effectively foots the bill,” Ms Gillard said.
The big miners say the MRRT deal on July 2 allowed for all state royalties to be offset against the tax — a view supported by the Institute of Chartered Accountants.
But the government now says the deal will be limited to state royalties that were in place or “scheduled” when the original resource super-profits tax was announced in May.
The truce between the new Prime Minister and BHP, Rio and Xstrata in July, under which the unpopular RSPT was replaced with the less onerous MRRT, cost the government billions of dollars in future tax revenue but took the issue off the agenda before the election.
Mr Barnett said yesterday he expected the MRRT agreement would collapse and the government would need to find a new way of raising $10.5bn from the sector, which could involve a special surcharge on company tax.
The stories about people who do a deal with the devil are always consistent in one respect, No matter how carefully crafted the deal is there is always a twist or some caveat that ends up screwing the deal maker. The big miners did a deal and now it turns out not to be what they were promised. Welcome to reality guys! now if you had had just a little faith and stayed strong you would not now be bathing in the sea of regret…