Gillard, Swan and Ferguson did a deal with the miners to sell out Australia’s sovereign wealth

Courtesy of The Stringer - http://thestringer.com.au/gillard-swan-and-ferguson-did-a-deal-with-the-...
Gerry Georgatos - Prime Minister Kevin Rudd and his Treasurer Wayne Swan were bent on a progressive thinking educated Australia which would be built from a fairer disbursement of sovereign wealth, according to credible parliamentary sources. The Stringer was told that Mr Rudd and Mr Swan were both adamant that other business sectors of Australia could not be hit for tax hikes till the resources sector was finally brought into line.
According to The Stringer’s sources that despite the personal Prime Ministerial ambitions of Deputy Prime Minister Julia Gillard and despite various disquiet among Cabinet members and parliamentarians who wanted more of a say such as Bill Shorten, Mr Rudd was strongly guided by a belief in himself “as the people’s choice of leader” and that ultimately he would be supported by the nation against “any propaganda from the mining industry.” He had been writing long essays on sovereign wealth and the economy, some 8,000 words long, which were being published, and he felt a certain hubris and standing among the nation despite the knives that were being drawn behind the scenes within his closest circle.

A profits-based mining tax was developed by Rudd and Swan to capture some of the unfettered wealth resource companies were reaping not just during this resources boom, but have always reaped. They set the mining tax at 40 per cent and applied it to all minerals. Thus ensuring substantive returns to the nation and the original forecast was to raise $12 billion in its first two years.

A ferocious backlash from the resource companies was seen as directly contributing to Kevin Rudd being replaced as Prime Minister on June 24, 2010. Immediately the new Prime Minister, Julia Gillard opened up direct negotiations with the three big miners, BHP Billiton, Rio Tinto and Xstrata. “In the mercenary world of big business where these companies were in unison fighting the mining tax alongside Fortescue and Hancock and others, once they had done the deal with Gillard and Swan, companies like Fortescue were stranded to bleat on their own,” said the source to The Stringer.

“But what Gillard did was sell-out not only the mining tax but also the Australian people. Without the mining tax being applied against all resource companies little was to be returned. Hitting iron ore and coal was not enough, and coal was hit because it was easy to hit with the bad press that coal gets these days. Gillard and Swan knew they had betrayed the nation, betrayed our party but they were going after how they were perceived and how well they polled and not what was in the nation’s best interests.”

Hence arrived the minerals resource tax, a very much so watered down version of the mining tax that many believe cost Mr Rudd his job as Prime Minister.

“In the end it was not the mining tax that cost Kevin the job and saw him hung out to dry and humiliated and the damage done to him lingers, it was actually Julia and the faceless men. It was Bill (Shorten), Michael (Danby), Don (Farrell), David (Feeney) and Mark (Arbib). Michael had a big hand in this for quite a number of other reasons too. The mining tax fiasco was a plausible vehicle for them to use to pull off this coup not just to the nation but also to other Cabinet members and the rank and file,” said the source.

“If they had stood behind Kevin on the mining tax they would have brought it in and they always knew this but they chose to cost the nation their long awaited chance to reap from miners what they had long been denied, for the chance at an orchestrated tilt at the Prime Minister’s job and sheer power. It is really a low point in not just the Australian Labor Party but in politics period.”

The cut rate to the minerals resource tax is 30 per cent and is only limited to iron ore and coal and it commences at the profit level of $75 million a year.

In July 2010, Prime Minister Gillard met with the mining industry and its anointed spokesperson, BHP Billiton chairman Don Argus. Mr Argus took on the self-harming bruised and battered Labor Party and ultimately the taxpayer would take on the real bruising.

The olive branch that was expected from Prime Minister Gillard was in the end the whole tree. She basically said this at her first news conference as Prime Minister on June 24, 2010. “I am throwing open the Government’s door to the mining industry.” On June 29, BHP Billiton, Rio Tinto and Xstrata walked through that door and met with Prime Minister Gillard, Treasurer Wayne Swan and Resources Minister, Martin Ferguson and the PM’s senior policy officer Tom Bentley.

“There were no economic giants in there, except if Wayne Swan wants to push that line about himself. Ken Henry was not in there, just some politicians with giants of the mining industry who can do the numbers on the best of those out there. It was all over with this meeting.”

Ken Henry was the economic guru who researched and designed the mining tax – the super profits tax.

The new deal rebated miners for all current and future royalties hit on them by the States, allowing them to deduct market value depreciation of their operations – this has huge tax write-off implications.

“You will find all resource companies writing down assets, depreciating everything in order to offset tax liabilities. The market value depreciations are deducted from their operations and therefore their tax bill.”

The revised forecast was a bubble waiting to burst without it being appropriately audited in terms of risk management. $10.5 billion in two years but it was argued on commodity prices at a peak. What was not factored into the revision was that the full suite of concessions promised to resources companies were not included into the projected revenue base from which assumptions leading to tax liability are determined. Our sources argue this was a gross impropriety and one of them said it should be an ‘impeachable offence.’

Eventually the forecast was once again revised and this time to $4.4 billion in two years.

“If they had stood by Kevin, and put away the knives and the personal ambitions, we would have had the budget in surplus and with billions reaped from the wealthiest among us and disbursed to the nation.”

“This is the real tragedy that few, if anyone, speak about.”

In the first six months the minerals tax has failed to live up to promises and raised only $126 million.

“The Budget, even if it is not in tatters, cannot deliver many of the promises that the nation had been hurting for,” said our source.

“There are those within our party who are pushing for changes to the tax and that the opportunity should not be missed and it is not just from our backbenchers. We have an opportunity with the Greens to get a redesigned bill through before it’s forever too late.”

“It may be what wins us the election, it may be what returns Julia and Wayne to office, all of us, the legacy of Kevin’s super profits tax. Abbott promises to scrap what he calls a bad tax, well I say this is the issue that the election should be fought on, the mining tax! It may be argued by the ignorant it cost us a Prime Minister and proper control of Government but many of us believe if we do the job properly on the tax and deliver on it we will be returned to Government.”

“You can’t have mining companies with the free-run we’ve allowed them and given them. One concession is that they can reduce their liabilities by going for depreciation in the market value of operations and for 25 years. For example Rio Tinto gets a billion dollar protection before liability kicks in. This should be nonsense.”

“The deal done back in June 2010 between Julia, Wayne, Martin and Don’s team should be seen for what it is and we should move quickly to fix what they destroyed.”