7 May 2021
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On mining taxes and sovereign wealth funds

Christopher Joye
27 April 2011

Lots of people have argued in favour of the mining tax and a sovereign wealth fund in recent years. Paul Bloxham in the SMH on Sunday makes a useful additional suggestion (others may have also proposed this): include our (extractable) natural resources as assets on the government's balance sheet to help quantify the value of the foregone earnings (or opportunity cost).

To be clear, we already tax miners for monetising these resources through Australia's royalty system. At its simplest level, the argument goes that these royalties are sub-optimal. I think much more could be done to explain to the public why this is the case. Focusing folks' minds on this 'great big new tax' reinforces the perception that this is just another Labor land-grab, which it is not.

This is, at its essence, sensible public policy. Almost every intelligent person agrees with that abstract proposition. The differences arise on execution: how high should the tax be; to whom should it apply; and how should it be implemented (such as, timing, consultation, etc).

To my mind, the Rudd Government had a tendency for centralised and unilateral decision-making (such as, the various GFC initiatives and the $40 billion-plus NBN white elephant). The Gillard Government appears to have learnt this lesson and is much more consultative. In pitching the new mining tax to the public, I would relentlessly remind folks that this is merely improving on our archaic royalty system.

Crucially, this was not some wildly grandiloquent scheme dreamt up by politicians on an aeroplane (like the NBN) without consulting the bureaucracy, but rather a policy initiative designed and advocated by the Treasury.

As for a sovereign wealth fund, we already have one: the Future Fund. One could simply divert more public revenues to the Future Fund in order to achieve this aim. We do not need to establish another entirely new and separate public infrastructure, which would be a terribly inefficient use of taxpayer money.

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