Australia Repeals Mining Tax Law
By Vittorio Hernandez | September 3, 2014 8:32 AM EST
The government of Australian Prime Minister Tony Abbott has mining tycoon and MP Clive Palmer to thank for because after one year in power, the Coalition successfully repealed the mining tax law on Tuesday.
A miner holds a lump of iron ore at a mine located in the Pilbara region of Western Australia in this December 2, 2013 file photo. World no. 2 iron ore miner Rio Tinto said on July 16, 2014 expansion work at its mines and productivity gains led to a sharp rise in iron ore output as it steps up shipments to Chinese steel mills. Picture taken December 2, 2013. REUTERS/David Gray/Files (AUSTRALA - Tags: BUSINESS ENVIRONMENT COMMODITIES)
The 30 per cent levy on profits of miners on coal and iron ore was one of the two measures initiated by former PM Julia Gillard, which Mr Abbott capitalised on to win the September 2013 federal election.
Treasurer Joe Hockey said the repeal would yield net savings of $10 billion.
In July, the Coalition successfully also repealed the carbon tax law, also through the support of Palmer and his political party. However, Palmer did not do it out of the goodness of his heart but as a political leverage - using to his advantage the party holding the balance of power in the Senate - since he agreed to support the repeal in exchange for some concessions.
These are to hold the government's contribution to state pensions and retain the bonus programme for school children. By holding the hike to the superannuation guarantee rate at 9.5 per cent until July 2021 instead of going up to 12 per cent by July 2010, the mining tax repeal would be revenue neutral in the medium term.
But keeping the schoolchildren's bonus until the next election would cost the Abbott government $6.5 billion. The bonus is $410 for families with primary school pupils and $820 for families with high school students.
Many large Aussie mining firms also favour the repeal of the unpopular Mineral Resources Rent Tax because it affected their global competitiveness and turned off future investors in the mining industry.
Hockey said the approval of the mining tax law repeal would result in the budget being better off by $50 billion over the next 10 years, but in the next four years, it would initially cause a deficit of $6.5 billion. It would be recovered in the medium term because in the delay in the hike of the superannuation guarantee.
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