The last budget kept our Overseas Development Assistance (ODA) unchanged at a nominal amount of $5.03 billion. In real terms that was a cut of 2.25% or over $100 million. Julie Bishop told us that it was a contribution that ODA would have to make to repair our budget deficit.
At the same time the government is abolishing the mining tax. We are obviously expected to believe that we cannot continue helping the world’s poor. It is more important to give money back to the miners.
The mining lobby keeps telling us about the great contribution it makes to the Australian economy. There is a lot of exaggeration in this and often much worse.
- As Ross Gittins in the SMH and others point out mining accounts for about 10% of our national production, but only 2% of employment. The large increase in mining investment in recent years has mainly been to purchase equipment from overseas.
- About 80% of our very profitable mining industry is foreign owned. BHP/Biliton is 76% foreign owned, RioTinto 83% and Xstrata 100%. This means that 80% of mining profits accrue to foreign shareholders and not to Australians. In this situation it is important for the owners of the minerals; we Australians, that we get some worthwhile return either in taxes or royalties.
- The Coalition government is planning to abolish the mining tax, just when it is likely to produce some worthwhile revenue. See my blog of May 6, 2014, ‘The cost of abolishing the mining tax’.
- State governments do receive royalties from mining companies for the exploitation of our national resources, but they hand a lot back to the mining companies. According to the Australia Institute, the states gave the mining companies $3.2 billion in concessions last year – mainly in providing railway infrastructure and freight discounts. In Queensland, these concessions or subsidies were equivalent to about 60% of the royalties the Queensland government received.
- We would expect that even if mining companies could dodge the mining tax, they would at least pay the 30% company tax. But not so. Michael West in the SMH on 27 April 2014 points out that Australia’s largest coal miner, Glencore/Xstrata paid no company tax at all over the last three years despite an income of $15 billion.( In response Glencore has said that over those three years “it paid $3.4 b in taxes and royalties”. But royalties are not taxes. They are a cost of production. So in my view Michael West’s assessment that Glencore did not pay company tax in the three years stands.) According to West it achieved this remarkable result of paying no company tax by paying 9% interest on $3.4 billion in loans from overseas associates. This 9% incidentally was about double the interest it would have had to pay in the open market or from a bank. Having paid 9% on these borrowings to load up its “costs” in Australia it then lent money to ‘related parties’ interest-free. We are not told who these related parties were. But there is more. Apparently there has been a large increase in Glencore’s coal sales to ‘related companies’ from 27% to 46%. This would seem to indicate transfer pricing to shift income to lower tax countries. In this regard Michael West reported on the complex Glencore company structure. ‘The Glencore structure is now run as a series of business units controlled by one company [Glencore/Xstrata Plc) which is incorporated in the UK, listed on the London and other stock exchanges, with its registered office in Jersey (a tax haven) and its headquarters in Baar, Switzerland. It is probably all legal but is it right?
The latest BRW 200 Rich List ranks Ivan Glasenberg, the CEO of Glencore Xstrata, as the fifth wealthiest Australian with $6.63 billion in wealth – up from $5.61 billion in the last twelve months. His current wealth is $1.1 billion more than we spend each year on ODA to help the poor of our region and the world.
The BRW top 200 richest people in Australia have a combined wealth of $194 billion. That is almost forty times more than we spend each year in ODA.
The poor of the world will just have to put up with a cut in our ODA. We can’t help the poor when we need to dole out enormous benefits to foreign-owned mining companies.
The rich are really inheriting the earth – our earth!