Australian Treasurer Wayne Swan defended the government’s mining profits tax Thursday after reports that no revenue had collected in the first quarter due to China-driven cooling in the sector.
The conservative opposition seized on claims in The Australian newspaper that the tax on so-called “super profits” had reaped nothing in the first three months of the financial year to June 30, 2013 as proof it was a botched policy.
“Only Labor could introduce a new tax that doesn’t raise a single cent, but has billions of dollars of expenditure against it,” said opposition finance spokesman Joe Hockey.
But Swan blamed a “real crash in commodity prices” for the tax’s slow start, with Canberra this week scaling back estimated receipts for 2012/13 from A$3 billion to A$2 billion.
He said iron ore prices had slumped 35 per cent since the original budget forecasts were prepared in May and coal had also come down “substantially”, hitting both mining and company tax takings.
Iron ore and coal are key ingredients in steelmaking, which has cooled markedly as China’s growth has slowed.
But Swan insisted that the duty would still meet earnings forecasts, saying one particular quarter could not be taken as representative of the whole year.
“The design of a resource rent tax is such that it delivers the revenue when profits are high, and in the case of commodities, when prices are high,” Swan told reporters.
“And of course when they go down, well it doesn’t necessarily deliver the same amount of money.”
The tax was watered down after a furious mining industry campaign that saw the government’s poll ratings plunge and resulted in then-prime minister Kevin Rudd being ousted in favour of his deputy, Julia Gillard.
Gillard was criticised by environmental groups and some economists for scaling back the tax so that it only applied to the key iron ore and coal industries and had a rate of 30 per cent instead of the original 40 per cent.
Australia dodged recession during the financial crisis due, in part, to its links to Asia, particularly China.
But the Asian giant’s slowdown has hit the mining-driven Australian economy hard, with major resources companies including BHP Billiton shelving or delaying projects as profits slide.