Who, then, are the winners of this tax? They include:
- Mine workers and mining communities. The long-run level of activity should go up, and the pressure on their wages and employment relations should go down.
- The general business community. Non-mining activities are taxed less because mining profits are taxed more, meaning that in general, businesses win out.
- The general public, simply because they can expect to benefit from reduced taxation and receive parts of the services bought by this tax.
- The economic system, because this kind of tax is very dependable (minerals can’t run away to foreign countries and hence the tax can’t be avoided), making the public finances sounder and more reliable.
Who are the expected losers of this tax? They include:
- Shareholders in mining activities in Australia. When they bought their mining shares, the shareholders expected to receive a certain flow of profits, and that profit stream is now taxed more, making shares in mining less valuable. These losers include domestic shareholders and foreign shareholders, such as major Chinese interests in Australian firms and foreign shareholders in mining companies operating in Australia. To a certain extent, the RPT means Australia is grabbing in the coffers of foreigners to the benefit of its own population.
- Shareholders in mining activities outside Australia. Many countries are facing the problem of how to tax economic activities without reducing the level of economic activity, and Rent taxes are recognised as being pretty close to the economic textbook ideal as to how to do it. Hence other countries will no doubt follow suit if Australia pulls it off. This makes international mining companies understandably nervous.
- Other holders of fixed assets within Australia. This tax of course establishes the principle that assets that cannot run away might witness an increase in the taxation of the income generated by those assets. There are quite a few other sources of rent that could in principle be treated similarly, making owners of fixed assets justifiably nervous. Land, in particular, would be a prime long-term target for tax increases.
Ultimately, where you stand in this debate will be a function of who you think should enjoy the lion’s share of this nation’s mineral wealth. Should it be you and me, through the services our government provides us? Or should it be the investors in for-profit corporations, through the dividends those companies pay them?
And someone has been doing some work to sort it all out Mining Tax facts