Wednesday, November 28, 2012

Phoney taxes for Capital and austerity for the people

Vanguard December 2012 p. 4
by Max O.

The ALP Federal Government's tax and budget expenditure deceit is now unfolding in full view of the Australian people.

Gillard's 'True Believer' pretensions in regards to the Carbon Tax and the Minerals Resource Rent Tax have given absolutely nothing to the environment and workers. The Prime Minister has truly reached the mantle of the 'True Deceiver'.

Corporate taxes that don't cost a cent

The Carbon Tax was never going to achieve the goal of reducing carbon emissions. The corporate polluters, the electricity generators and smelters, now receive generous subsidies to carry on polluting and pass on the cost to the households. They in turn receive some compensation with bonuses and minor tax cuts to enable them to consume electricity at the same rate before the carbon tax.

At the same time households are suffering from price gouging by the electricity corporations.

And before you could say the words, "climate change" the Gillard government has backed away from using the revenue from the carbon tax to pay out and close down the worst polluting power stations, because, would you believe, it is too expensive!

This great step forward to carry out significant reductions in carbon emissions has come to nought, and the government is only pretending to do something about climate change.

Mineral Resources Rent Tax

Next we have the success story of the Minerals Resource Rent Tax (MRRT); well it was a success for Julia Gillard in her ambition to achieve the office of Prime Minister!

After the hue and cry by the mainly foreign mining monopolies over Kevin Rudd's relatively mild Super Profits Mining Tax (SPRT), Gillard snatched the prime ministership away from him and implemented BHP/Billiton, Rio Tinto and Xstrata's orders for weakest tax of all, the Minerals Resource Rent Tax.

It has become a Clayton's tax, where the mining corporations end up paying little or no tax at all – going from a mining tax rate of 40% (for the SPRT) to an effective tax rate of 22.5% (for the MRRT) and which only affects iron ore and coal mining operations generating annual profits over $75 million. On top of this, there are all the deductions that the mining corporations demanded and received to further reduce this tax.

This starts off with all state governments' mining royalties being deducted from the MRRT. Another example is the opportunity for these mining giants to write-off exploration and investment costs.

Therefore the costs of any new project can be deducted from another project that is making a profit. As companies carry out exploration and start up new projects on a continual basis, they could avoid paying the MRRT for years.

Treasurer Swan boasted that the MRRT would raise $10.6 billion over four years and that in the first year $3.7 billion in revenue would be collected. However, this was reduced to $2 billion in the mid-year budget update.

A month later, we learn that the mining giants smugly informed the Tax office they would pay zero MRRT for the first quarter of the new financial year! Smart punters are betting that MRRT revenues for the next three quarters are going to amount to zeros as well.

This is galling, even considering that while ore and coal prices have fluctuated up and down, profits are still enormous. In August, Xstrata reported a $1.95 billion, Rio Tinto $5 billion and BHP Billiton $15 billion in half-year profits.

Budget cuts on social expenditure

While there are gains for the mining giants you can guarantee there will be pain for ordinary families. The Gillard government is intent on delivering at least $4 billion in cuts in the budget if their 'fiscally responsible' small surplus is to be achieved next year.

First for the chop was the Single Parent allowance. From next year people will be moved from the single parent payment to the dole (Newstart) once their youngest child turns eight, cutting between $65 and $115 per week from 100,000 single parents. This will save the government $728 million over four years.

Next came the Baby Bonus, with 87,000 families targeted with a cut from $5000 to $3000 for the second and subsequent children, saving the $500 million over four years. While the Baby Bonus was poorly designed, these savings would be better targeted as family payments to parents struggling on low incomes.

The future holds out more cuts to social expenditure and whether the Gonski Report (increased educational funding) and the National Disability Insurance Scheme ever get a Guernsey, don't hold your breath.

Now the deception has come home to roost, and the ordinary people suffer for it. These phoney taxes for the powerful, mainly foreign corporations were never going cost them a cent. They were just smoke and mirrors to create the illusion that the Gillard/ALP government was making the big end of town contribute to the tax system like everybody else.

Unfortunately what awaits ordinary Australians is a new wave of austerity because the Gillard/ALP federal government refuses to make the rich pay. Hold onto your seats for Australia's rough ride into the capitalist induced economic crisis and the pain it will inflict on the working class.

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