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Crying wolf once too often (The Punch)
Since word got out that the government was considering cutting back on the $2 billion handout to resource companies known as the Fuel Tax Credit scheme, there has been the normal outburst of complaint from the industry’s lobbyists.
In last week’s Financial Review, it was Australian Petroleum Production & Exploration Association’s turn to insist that any cutbacks to this boondoggle would result in risk to ‘billions of dollars in investment in oil and gas development’.
If this sounds familiar, it’s because you’ve definitely heard it before.
When faced with the original mining tax, the Minerals Council claimed it would drive miners to other countries to dig up minerals, creating the now-mythical ‘sovereign risk’. Similarly, groups like the Business Council claim a price on pollution will eviscerate the economy, driving businesses broke and ‘exposed’ industries offshore.
The same, tired, argument was wheeled out last week when some of the country’s most profitable companies were asked to contribute a little bit to the global effort to cut down our use of fossil fuels.
It was inevitable that at some point Australians would stop listening, and it appears that that time is now. What is the difference this time?
While the mining tax and the price on pollution were changes for business to adjust to, this is the government considering spending taxpayer dollars in a better way. The bleating of vested interests resonates with the public less when they consider where their money is being spent.
The Fuel Tax Credits scheme is an annual gift of taxpayer dollars of which $2 billion – $173 for every man, woman and child – finds its way into mining companies’ coffers. Originally intended to help Australian exports, it is now a nifty tax write-off for hyper-profitable companies that delivers no discernible economic benefit. It’s not overcoming a market failure, rather it’s creating one by distorting investment towards higher fuel using technologies at the cost of more efficient alternatives. It is simply a donation of public money to an industry that is in no need of charity.
Let’s be clear about what the fuel tax credits really mean. It means if you are a hard-working commuter in Sydney’s western suburbs or Melbourne’s south-eastern growth corridor, with little or no access to reliable public transport, you pay 38 cents per litre in tax on the petrol you need to get to work. But if you are the world’s wealthiest mining company you pay virtually no tax for the diesel you use in your operations to dig up, refine and export Australia’s non-renewable mineral resources
With $450 billion in resource project investments in the pipeline across Australia, it is disingenuous for industry lobbyists to claim that unwinding this annual handout would be the tipping point that sends resources companies packing their bags.
Considering that this is supposedly the third policy decision that will send the entire resources industry fleeing to Buenos Aires, it is understandable that Australians have begun to take their predictions of mass exodus with a hefty helping of salt.
It also may be because the lobbyists are getting lazy.
APPEA offers no demonstration of ‘growing domestic and international concern’. It simply asserts it. Trust us. You have before. You will again. At the same time as claiming the scrapping of the Fuel Tax Credit handout would risk billions of dollars of investment the peak body has the gall to say the sector is ‘critical and growing’. Again, curious readers could be forgiven for wondering why these members of such a vital and robust industry were considering emigrating.
The fuel tax break isn’t the only handout these companies enjoy. ACF estimates that accelerated depreciation for oil and gas is on its way to becoming a $2 billion annual imposition on taxpayers due to the explosion in investment.
One of the core pillars of good tax policy is equity, and these, among other tax breaks for the resources sector, fly in the face of this notion.
This is not simply the position of an environmentalist, dismissing handouts to Australia’s biggest polluters out of hand. These are bad policies, pure and simple.
The Australian public has given miners, resources companies and their representative bodies a fair hearing. But when the same failed argument raises its head for the third time, and it involves a direct infusion of wasted taxpayer money? That’s where the line is drawn.
Taxpayers who can’t see the sense in continuing to help pay for fuel for multinational mining giants are smarter than that.
Simon O’Connor is economic adviser with the Australian Conservation Foundation.
This article was orginally published by The Punch.
