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Is it time for a super profits tax?
With the surging price of iron ore and the sizeable profits miners are now pocketing, former prime minister Kevin Rudd has renewed calls for a super profits tax that would see mining companies invest in Australia’s future.
Is it time for a super profits tax?
With the surging price of iron ore and the sizeable profits miners are now pocketing, former prime minister Kevin Rudd has renewed calls for a super profits tax that would see mining companies invest in Australia’s future.
The price of iron ore rose to US$187.75 a ton on 20 April, according to S&P Global Platts.
It has risen by 17 per cent over the past month, extending a rally that began when prices were below US$100 a ton less than a year ago.
Australia’s mining industry has been buoyed by the collapse of Brazilian mining infrastructure during mass flooding in 2019 and strong Chinese demand which, combined, have seen the price of iron ore quadruple since 2015.
It is due to these surging prices of Australian commodities that Mr Rudd believes a super profits tax is warranted, similar to the model he tried to pursue during his time in the prime ministerial office.
“As was the case during the last resources boom, and the one before that, the super profits earned by a handful of resource majors in this country are a giant rip-off of the Australian people,” Mr Rudd said.
The former prime minister pointed out that the mining companies have failed to give back to greater society despite strong growth in profits.
“Furthermore, the greed of these three is unbelievable: they haven’t even bothered to establish serious, large-scale charitable foundations to benefit the Australian people at the scale that other serious global firms do. And in Rio’s case, they dynamite indigenous heritage in the way through,” Mr Rudd said.
The miners don’t agree. In fact, they have been known for defending periods of extreme profitability by highlighting the link between commodity prices and profits, while also pointing to the initial investment cost.
Naturally, Mr Rudd has a rebuttal: “I fully understand the financial investment needed for long-term projects. But nowhere in their long-term financial planning did any company forecast prices at this level. That’s why the Australian people, who actually own these resources and merely lease them to these companies, deserve a higher return.”
The former PM called for profits to be reinvested back into Australia’s society, given the minerals are pulled out of Australian land.
“That’s why I believe these three majors should pay a super profits levy into a national investment fund to underpin the future of Australian higher education and research, because this is the sector that will need to generate the next tranche of national wealth. We need Australian equity in the global technology revolution now underway, where we are in danger of owning none of the intellectual property and assets that will drive future global growth,” Mr Rudd concluded.
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