Saturday, July 3, 2010
AUSTRALIA'S market economists overwhelmingly endorse the principle of putting a resource rent tax on mining activity but not the model proposed by Treasury.
The panel in The Age economic survey will be happier with the new model unveiled yesterday, which is largely in line with their suggested changes.
Of 13 economists responding to a question on the tax, 12 endorsed the idea of taxing mining profits in place of royalties.
The one holdout was Greg Evans, policy director of the Australian Chamber of Commerce and Industry. But even he opposed this version of the tax rather than the principle.
Almost all, however, added that the tax could be improved through negotiations to ensure it was not excessive, did not inhibit investment and gave fair treatment to past investments in existing mines.
Several urged changes similar to yesterday's agreement: a higher uplift factor, no compensation for losses, a lower tax rate and putting a market value on past investments in existing mines.
"The economic and social arguments for profits-based taxes on non-renewable resources are compelling," wrote Commonwealth Bank economist Michael Workman. He likened it to reforms such as floating the dollar, cutting tariffs, and introducing a capital gains tax and the GST. "Tax reforms are one of the drivers of Australia's relatively favourable economic and social outcomes over the past 30 years."
Richard Gibbs, of Macquarie Bank, urged that the tax be remodelled along the lines of the petroleum resource rent tax. He also suggested that its merits "would be enhanced by a mechanism to preserve a large proportion of the revenue as long-term national savings".
Annette Beacher, of TD Securities, suggested all revenue from the tax be saved, not spent. "The government should not rely on profits-based taxing to fund fixed and recurrent expenditures."