Straight from the source
The
effective company tax rate for miners is 27.81 per cent, the 14th lowest out of
19 sectors. When royalties, which at present go to state governments, are taken
into account, the industry moves to 41.34 per cent, the highest for total tax.
The
Rudd government missed the political opportunity to make this point because it
relied instead on old data from US researchers Kevin S. Markle and Douglas
Shackelford, of the National Bureau of Economic Research, that is no longer
applicable.
Both
sides in the super-profits tax debate - Labor and the mining companies - have
engaged in selective quoting of official statistics. And both sides have
confused the public by comparing apples with oranges.
The
Australian has sifted through the data and the competing claims to find mining
is paying a significantly lower rate of tax to
However, the proposed resource super-profits tax will change that equation by
applying a second tax at the federal end to replace the state-based royalties,
which will be refunded out of the proceeds of the new tax.
Using
the figures the Minerals Council of Australia cites in its defence, mining is
taxed less at a federal level than all but five sectors: accommodation and food;
electricity, gas and water; agriculture; real estate; and financial services.
The
mining industry says its effective tax rate of 27.81 per cent is higher than the
all-industry average of 24.56 per cent. But the average is dragged down by the
21.54 per cent rate paid by financial services.
Comparing apples with apples, mining pays 0.57 percentage points less than
manufacturing and 0.63 points less than construction. The highest-taxed sector
is public administration and safety, which is 1.84 points above mining at 29.65
per cent.
Royalties change the equation because they take the effective tax rate for
federal and state taxes to 41.34 per cent.
The
nub of the super-profits tax debate is how the Rudd government's new regime
stands up against the old.
For
mining companies with low profit margins, the new regime is a winner. For any
project earning less than 10 per cent return on its investment, the Rudd
government's new tax will collect less in total.
But
even this figure can leave the public scratching their heads, because it looks
at the effective tax rate on a simple measure of the profits.
The
actual tax paid by an industry is determined by what it declares to the taxation
office, less its costs.
This
is where both sides tend to bamboozle even themselves by throwing different
concepts into the argument.
The
mining companies complain on the one hand that they pay company tax plus
royalties of 41.34 per cent, yet BHP tells its shareholders it pays 43 per cent.
BHP
chairman Jac Nasser wrote last week: "The government's proposal would see the
total effective tax rate on BHP Billiton's Australian profits increase from 43
per cent to 57 per cent, making the Australian resources industry the
highest-taxed in the world."
But
that 43 per cent figure doesn't square with the industry average of 41.34 per
cent, because the former relates to profits while the latter refers to taxable
income.
So how
does BHP get to 57 per cent under the new regime? By assuming a rate of return
on its investments of more than 50 per cent - a profit figure that, unwittingly,
helps Labor's case to secure a better tax deal for the community.
The
mining companies have been collecting more money in recent years not because
they are necessarily more efficient, but because
Either
way, the story happens to be the same. Mining is taxed less than most other
sectors when it comes to corporate tax.
We
believe the real answer is a fairer tax system for all Australians and you can
be assured that our senior politicians have been shown, all that is needed are
the Prime and Treasurer to implement a plan to introduce this Tax System .
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