In the piece Why is a good Government down in the polls, several reasons for this state of affairs were proposed that included media malevolence, media manipulation, promises sometimes construed as being broken, less-than-perfect management of expectations, inadequate communication of policies, plans, actions and achievements, and less than clear definition of the principles on which the Government will stand firm. This is the first of several pieces that suggest some remedies.
The last piece on the Resource Super Profits Tax, Getting some balance into the RSPT debate brought together a number of articles and documents that exposed different aspects of the RSPT. This might have been helpful to the few who were sufficiently interested to plough through the detail, but of no interest to the bulk of the electorate who, if they want to know anything about the RSPT at all, certainly don’t want to delve into the complexities. At the most they want a simple-to-understand explanation condensed into a few memorable dot points.
As mentioned in the piece Why is a good Government down in the polls, this Government has not done well in explaining its policies, plans and actions. The ETS was not well explained and neither has been the RSPT. Confidence in the merit of both has been eroded by the four-word negative Opposition slogan: ‘Great Big New Tax’. That’s all many voters will have heard and they have naturally reacted to these policies negatively as is evidenced by the steadily falling support for an ETS, and only about 50/50 support for the RSPT, despite the latter being of such benefit to the majority of working Australians and small businesses.
The Government has embarked upon what the media and even some Government ministers have chosen to call an ‘advertising campaign’ to promote its RSPT. In fact ‘advertising’ is a misnomer for what is for the Government, and indeed the mining industry, simply an information programme to educate people about what the RSPT proposes to achieve and its advantages according to the Government, and for the mining industry, the disadvantages of the tax from its point of view.
Because the term ‘advertising’ has been used, a strident campaign has been launched by the Opposition and the media criticizing the Government for ‘breaking its own rules on advertising’ by having evoked ‘special circumstances’ as the reason for beginning it now, thereby circumventing the Independent Communications Committee. Senior ministers have not evoked either of the two other reasons: ‘a national emergency’ or ‘a matter of extreme urgency’, as the Opposition and media maintain, although Special Minister for State Joe Ludwig is reported to have used the ‘matter of extreme urgency’ reason. If that is so, and there are doubts about that, he should have been more careful and stuck to ‘other compelling reasons’, which is an accurate descriptor, as indeed there are compelling reasons for an immediate information campaign to counter the contemporary well-funded onslaught of the mining industry. It’s another instance of the Government’s media unit mishandling what was bound to be a contentious campaign. As a result Kevin Rudd has been lambasted up hill and down dale by the Opposition and the media for, in their opinion, breaking yet another promise, insisting that in the process he has further shredded his credibility.
The whole episode could have been handled differently. As the $38 million funding for the Government public information programme was already in the Budget, where incidentally it evoked no comment from the Opposition, and was therefore planned well in advance as a necessary component of the RSPT strategy, all that was necessary was to state that because of the heavily funded and pervasive campaign by the miners that was stridently spreading misinformation right now, it was necessary for the Government to bring forward the public information programme it had planned and for which it was already prepared, and that this pressing need constituted the ‘special circumstances’ that were sufficient reason for bypassing the usual Independent Communications Committee mechanism. Talk about the Government making a rod for its own back.
So the Government public information programme began. I haven’t seen TV or heard any radio promotion, but the newspaper campaign is less than impressive. Although visitors to The Political Sword would likely read the full text, I expect most would glance only at the bold headings on the one page spread I read in the AFR:
A fairer tax on resources for a stronger economy
A fairer share, a stronger mining industry
Strengthening all sectors of the economy
Ongoing consultation with the mining industry, and
Get the facts.
Without the explanatory text in small print, these headings give only the most general idea of what the RSPT is all about, and certainly do not explain what the average citizen stands to gain. Spreads in other papers have even less bold headings. There must be a better way to inform the public.
Why there is detail in the small print, probably far too much for most, and so little in the bold headings, may be a reflection of the mindset of senior ministers who favour detail over simplicity, probably to the chagrin of those who have been assigned the task of preparing the material. It is a well known phenomenon in education that those who understand all the intricate details are often the least able to communicate them simply. Moreover, a pedantic obsession with accuracy too often blunts the message. There is a need to take a liberal approach that results in simple clear communication rather than detail that confuses.
Journalists have been singing in unison about how poorly the Government has sold its RSPT, repeating quips like ‘they couldn’t sell heaters to eskimos’, yet none, not one that I have seen, has made any suggestion about how the Government might improve the selling of its RSPT. Frankly, they probably don’t know, and anyway its easier to criticize than give positive advice.
What follows is an attempt to capture, maybe in an amateurish way, the essential elements of the RSPT that might ‘sell’ it to the average voter. Your comments and suggestions for improving these points will be welcome. Together, we might be able to assemble something that could be of value to the Government. The dot points below are arranged in succinct lists under bold headings that could be used singly or in groups.
The central messages
All Aussies own Australia’s minerals.
The miners are not paying enough for them in taxes.
A decade ago they paid 1 dollar in 3 of mining profits.
Now they pay only 1 dollar in 7.
We deserve a fairer share for our minerals.
The Government’s new Resource Super Profits Tax corrects this unfairness.
What’s happening now?
Miners pay royalties to the state government for what they dig up even before they make a profit.
This means they are paying during their set-up phase.
Then when they make a profit they also pay tax on that.
They pay company tax too.
The system is so complex that it is unclear what they are really paying.
They claim they are paying a lot - the Government says they aren’t.
The Government has shown they are not paying Australians a fair share.
Remember that once all the minerals are dug up and sold, there are no more.
So we need to get value for them NOW.
Some essential details about the RSPT
The RSPT is a fairer system for all.
First, it gives back to miners what they now pay the states in royalties.
Next, it allows them to deduct ALL expenses and special allowances before a profit is declared.
They pay NO tax on the first 6% of profits.
They pay 40% tax ONLY on profits above that 6% – ‘super profits’.
If they made $100 million profit, they pay no tax on the first $6 million.
They pay 40% tax on the remaining $94 million, that is, $37.6 million.
Therefore they keep $62.4 million out of $100 million profit – not bad!
All businesses have to pay taxes on their profits.
The miners should pay a fairer share.
How does the RSPT benefit ordinary Australians?
The income from the RSPT will be used to fund:
Better superannuation for all workers - from 9% to 12% of wages. This will mean a 30 year old will have over $100,000 more super on retirement.
Easier tax returns for ordinary Australians.
For most individuals, no need to send in a tax return at all.
Automatic $1000 deductions for all.
Lower company tax - for small businesses this will occur soon.
Additional capital deductions for small businesses.
Infrastructure for business - road, rail and ports to transport its products.
The RSPT will make Australia’s economy stronger - that will benefit all Australians.
If the RSPT is blocked by the miners and the Opposition, all these benefits will be lost.
Who is running this country - the elected Government or the miners?
The RSPT helps the miners too
The RSPT encourages miners by:
- underwriting their set-up costs by giving them a 40% rebate on their expenses,
- refunding ALL up-front royalty payments they make to the state.
Then they pay tax ONLY on their ‘super’ profits - those over 6%.
This is a fair scheme that supports miners before they become profitable.
And it taxes them ONLY when they do.
Myth-busting the many myths about the RSPT
Myth - The miners claim they saved Australia from recession. Did they? NO.
During the downturn they sacked over 15% of their workers - if the rest of Australia’s employers had done the same, unemployment would have reached 19%.
Myth - The RSPT will impose 58% tax on miners. NO it won’t.
Profits tax is paid ONLY on profits. If no profit is made, no profits tax is payable. That 58% figure is way too high. It will likely be less than half of that.
Myth - The RSPT is a ‘dagger at the heart of the mining industry’. NO it isn’t.
It assists miners to establish new projects and taxes them only when a profit is made. Leading economists have backed the RSPT.
Myth - Miners have said they will defer projects or take them offshore. THEY HAVEN’T.
This threat is just part of the scare campaign. Rio Tinto, BHP Billiton, Fortescue and other miners have made no changes to development schedules that collectively will add 200 million tonnes more for export by the middle of the decade.
Myth - The RSPT constitutes a ‘sovereign risk’ to investment in Australia. NO it doesn’t.
The mining sector is seeking to redefine the concept of ‘sovereign risk’ to something very different from the way it is generally understood. Typically, it is understood to relate to issues of conflict, corruption and expropriation in a country that would scare off investors, but now sections of the mining sector want us to believe that sovereign risk arises whenever there are tax changes the industry doesn't like. It doesn’t.
Myth -Tax on mining profits will drive up prices on everything. NO it won’t.
Tax on profits never do - this is basic economics. All businesses pay tax on profits. Economists insist the RSPT will not harm the economy.
Myth - The Government should have consulted with the miners before it announced the tax. IT DID.
Miners made submissions to the Henry Tax Review. THEY ASKED FOR A PROFITS TAX to replace the royalties system.
Myth - The miners are not being given a fair chance to express their views. WRONG.
The Government is consulting with them RIGHT NOW and offering generous transitional arrangements to phase in the RSPT, WHICH DOES NOT KICK IN UNTIL 2011.
Modifications are possible, but the Government is sticking to its 40% tax rate on super profits. That is fair to all Australians.
Myth - The tax is retrospective and that’s unfair. NO IT ISN’T.
The miners want to pay the RSPT ONLY on NEW projects. That is untenable - all tax changes apply to existing endeavours. An established business pays tax on profits no matter what changes to tax rates are made - they would pay less if tax rates went down, so they pay more when they go up. The new tax will NOT apply to past tax years.
Myth - The RSPT will reduce the value of mining shares and super funds. NO it won’t.
The stock market goes up and down. Recently the market went down because of uncertainties about economies in Europe. All of the market went down, and mining shares with it.
Mining companies have unsettled the markets with their scare campaign; this has driven their own share prices down.
Despite some losses on mining shares many miners have bought millions more of their shares themselves, a sign of their confidence.
Mining shares will recover when the market does - this is happening already.
Why is the Government introducing an RSPT?
It is designed to benefit mining, especially exploration, to give Australians a fairer share of the bounty of the mining sector while our minerals last, to give benefits to working Australians, companies and small businesses, to strengthen the economy, and to consolidate it for its long-term future.
Support it for Australia’s sake.
For those interested in further information on the RSPT, The Daily Bludge has a Mining Facts Sheet.
So what do you think? Clearly, to use all of the above at once would be overkill. How would you use them? How would you group them? Do you think they convey the essential messages? Would they have more, or less impact than the Government’s information pieces? Is there anything you would like added or deleted?
Finally, after we’ve all had a chance to mull over them and improve them, would it be worthwhile forwarding them to the Government’s media unit?