Government Duplicity

In the current debate on the Resources Super Profits Tax (RSPT), the government is squandering $38 million in taxpayers funds in an advertising campaign that is not only inept but downright misleading.

True, the miners are putting out equally misleading advertisements, but at least they are not wasting taxpayers' funds doing so.

There are several aspects of the RSPT that are worrying, leaving aside the question of whether it is unconstitutional on the grounds that a State owns the resources within its boundaries and why it is applied only to this sector. (Why not apply it to, say, banking, which could arguably be accused of ripping off customers far more than miners?)

As it stands at present, the RSPT is collected by the federal government and used for federal expenditure, which means it will go into consolidated revenue and be used for whatever social programs the government chooses. These are usually poorly researched and implemented, witness the insulation debacle, and this close to an election, likely used for pork barrelling.

Resource rich States will have revenue from mining reduced and have to lobby the federal government for a return of RSPT money to fund projects needed at State level which are currently funded from mining revenue, like rail and port infrastructure.

Included in the RSPT is the proposal that miners will get a 30% rebate on exploration costs and a 40% rebate on losses incurred. This preposterous proposal has not been shown in the advertisements put out by both sides!

Not surprising, considering that it would lead to a taxpayer backlash when they discover only a relatively small number of mining explorations lead to projects that become profitable. Most taxpayers are unaware that of the around 900 mining companies listed on the stock exchange, only a handful are successful. Who can name more than a dozen?

Of course, the public sector would benefit enormously. Think of the jobs created in this unproductive sector as departments are set up to review State government requests for funds from the RSPT and applications for rebates from mining companies for exploration costs and losses.

Naturally, by the time these applications are made, the money already collected will have been allocated to some government project elsewhere (for the so-called benefit of the community overall), so the process will be made too difficult for many miners to bother with and proposals for future works will be postponed or abandoned leading to potential job losses and future revenue.

The whole idea of private enterprise is that companies make an offer to the public via a prospectus to invest in a project by means of taking up shares in the company in the hope and expectation of making money when it is successful via dividends earned on their shares and capital appreciation of their shareholding.

Shareholders enter the arrangement in full knowledge of what they are doing and bear the consequences of loss of capital if the company fails. In short it is a personal choice.

Governments can never replicate this process, instead they simply hit taxpayers with a bill each year to fund their, often dubious, projects, which are rarely run effectively or efficiently. Personal choice is not an option.

Just consider how government departments at Federal, State or Local level, if they have any funds left over towards the end of their financial year, rush to spend them on replacing perfectly good equipment, or send staff on unnecessary so called training seminars, or any number of other projects. Who in the public sector would ever think of returning the funds to consolidated revenue so that taxes can be reduced or the funds reallocated to more deserving areas?

The Federal government would be better off addressing the issue of reducing waste and inefficiencies in the public sector than interfering in the private sector.

Perhaps some steps in these directions will be taken by the new leader Julia Gillard, but that is probably too optimistic!