Abbott put government spending cuts, rather than taxation, at the heart of his plan to return the federal budget plan to surplus. Details of those plans were thin on the ground last night, however, with Abbott telling Parliament that Shadow Treasurer Joe Hockey will reveal the main details of the proposed spending cuts next week.
But the Liberal leader firmed up his party’s opposition to the resource rent tax, describing the proposal as a “prohibitive rate of tax on returns above 6 per cent”
“It is hard to overstate the seriousness of this. A 40 per cent tax on so-called super profits coupled with a 40 per cent government rebate for losses penalises good projects and rewards the duds,” he said.
“Perversely, it gives an unfair advantage to projects backed by foreign sovereign wealth funds which won’t need to satisfy normal commercial risk assessment. These projects could then transfer price profits out of Australia and sell ventures at a loss subsidised by Australian taxpayers.”
Abbott described the logic of the budget as “bizarre”, saying the government was effectively arguing that putting a new tax on cigarettes would result in less smoking, but putting a new tax on resources would result in more mining.
“If this tax is going to be so good for the resources sector, why aren’t other industries lining up to beg for a super profits tax to be imposed on them?” he said.
Speaking to 3AW radio in Melbourne this morning, Abbott said he accepted his decision to oppose the resource rent tax meant there would be no introduction of a number of other measures that were dependent on cash from the planned $9 billion a year tax in the near term – including the planned reduction in the general corporate tax rate to 28%.
“I’m afraid we can’t have it, can we? Because that’s a modest reduction, funded by a great big new tax on our most productive sector,” he said.
He also accepted that his proposed 1.7% tax on big companies to fund a national paid maternity leave scheme would hit the big miners, with BHP Billiton likely to have to pay an extra $268 million a year under the proposal and Rio Tinto around $150 million.
Abbott defended the move as a “productivity measure” and said the tax was a “mere pinprick” compared to the resource rent tax.
Henry defends tax
Ken Henry will appear before a federal senate committee sometime before July to defend the so-called super profits tax, after the opposition and independents passed a motion specifically aimed at forcing his appearance.
Henry would normally appear before Senate committees during the estimates process, but this year is due to take personal leave during the period.
The opposition motion was aimed at forcing him to cancel that leave, but the Greens stepped in to modify that demand, forcing Henry to appear before the Senate Economics Legislation Committee sometime before the beginning of July.
The move came as Henry spoke publicly in defence of his tax proposal for the first time yesterday, saying it would boost the mining industry and the economy, despite the outrage the tax proposal has caused in the resource sector.
In a statement yesterday, he denied reports in some media outlets that his department was happy about the prospect of the tax slowing growth in the mining sector.
''It is the strong and clearly stated view of Treasury that the resource super-profit tax will grow the mining sector and the economy,'' Henry said.
''The tax was constructed on that basis, and the modelling released with the tax package clearly demonstrates it.''
