1. What is the mining tax?

The mining tax is best known as the resource super profits tax, or RSPT. It is designed to replace the confusing array of royalties that mining companies presently pay to the states. Any profit made by mining companies that is above 6% of their capital investment would be taxed at 40%, and all royalties presently paid to the states would be rebated.

2. Why are mining companies making “super profits”?

Senior economist, Dr John Perkins says that resource prices are increasing rapidly because there is not adequate global production capacity. This has led to a huge difference between the cost of getting minerals out of the ground and the price at which they are being sold. Contrary to popular belief, most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense. Remember that these minerals are a finite resource – when they run out the money stops coming in.

3. Why does the Government want to introduce the mining tax?

Presently, mining companies pay royalties to the states which vary depending on the mineral being mined. While the cost of minerals has skyrocketed on the world market, these royalty payments have not risen anywhere near as quickly. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today’s profits and that’s where the new mining tax comes in.

4. What will the new tax be spent on and why?

While parts of the Australian economy have benefited from the resource boom, other parts have suffered. Strong demand for our resources has pushed the Australian dollar higher, hurting farmers and manufacturers who export Australian-made products as their products have become more expensive to foreign buyers. The higher dollar has also impacted tourism and our foreign-student education industries. As a result, we have what has been described as a two-speed economy. The miners and associated service industries are doing very well, while our exporters are suffering. Labor plans to spend the new mining tax by cutting the company tax rate from 30 percent to 28 percent, and by introducing tax breaks for small business. This would help address the imbalance in our economy, and ensure that the benefits on the mining boom flow through to all Australians.

5. What would the mining tax mean for me?

Economic modelling by the Treasury as well as independent modelling by KPMG have found that the mining tax would see the average worker gain about $450 a year, due to the flow-on results of cuts in company tax and tax breaks for small businesses. The overall cost of food would drop by 0.9%, clothing and footwear by 1.3%, housing by 1.1%, transportation by 1.7% and communication by 1.4%. The inflation rate would drop by 1.1% which would, in turn, ease the pressure on interest rates and finally, Australia’s gross domestic product (GDP) would rise by 0.7%.

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