Craig Emerson capably discusses the collapse of the comprehensive RSPT and the adoption instead of a much narrower resource rental tax (an MMRT) on coal, oil and iron ore. Readers of this blog will know (see last post) that I have changed my view on the RSPT. It was a (possibly justifiable) grab for resources by the Commonwealth Government but, correctly implemented as planned, it was neutral with respect to exploration activity. In this sense at least it was an ingenious tax that would transfer extra resources to the Government without influencing exploration effort. On the assumption that the mining companies understood this – if they didn’t they should sack their economists – it is apparent they were lying about disincentive effects on exploration to protect the rents they were earning. Again this motive might be justified but that that does not justify distorting the truth.
I am surprised that Emerson concludes that miners attached no value to the RSPT proposal to carry forward 40% of project costs and refund these (with interest) once the project either became profitable or failed. No value? This suggests they assumed with probability one the government would welch on its undertakings which seems extreme. If this was the only objection why not (as many have pointed out) refund the 40% share of costs immediately or issue a marketable bond for that amount that would need to be redeemed by the Government with appropriate interest?
The current tax will not refund losses to projects that fail and will on this account alone be non-neutral. The miners and their nitwit libertarian ‘supporters’ have forced a tax reform that reduces the Government take from tax reform but which is certainly inefficient since now winners provide rewards but there there are no cost compensdations to projects that fail. A better reform from this perspective would be to retain the original RSPT but reduce the tax take. This would have addressed the concern that the miners were not being left with not enough but would have yielded a neutral tax that worked better than its replacement. (1146)