All resource companies must be subject to a special level of taxation modelled on the Norwegian and Danish systems. This is to ensure that Australia benefits in due proportion to the profits being earned from what is a one time process. Once the resources are gone, the profit and industry are gone with them, Australia needs to ensure there are other businesses in place for the inevitable end of the mining boom.
If large mining businesses threaten to leave, encourage them to do so as they can be easily replaced. They can’t mine Australian resources in another country. It’s time to call their bluff as Denmark and Norway already have. The Danish government imposes a 62% profit tax on oil extraction companies and uses the money to fund national infrastructure changes. Norway established a sovereign trust fund in 1990 when North Sea oil extraction took off, in order to provide for the nation’s future. In January 2014, that fund is the largest sovereign wealth fund in the world, at around AUD$936 billion. By restricting expenditure of the fund to an annual rate of just 4%, the government hopes to preserve it indefinitely to help Norway through future difficulties. That 4% limit now amounts to around AUD$37 billion in government spending every year, which does not need to be funded by taxation. Australia would do well to learn from this example and many global organizations such as the OECD and the IMF have called for the Australian government to do exactly that. This fund could help to level out dips in commodity prices and export volumes, assist the next twenty years of baby boomers entering retirement and build a source of permanent funding for national infrastructure projects. This must be considered completely separately to private superannuation funds in Australia that total more than AUD$1.7 trillion in early 2014. These funds will not be used directly on national projects, they are held by millions of Australians to help fund their own retirement needs and this reducing the burden on government to provide.
The fact is, Australian mining companies are over 80% owned by foreign investors. Of the total current average annual mining profits of around $53 billion, $37 billion goes to foreign investors and at least $7 billion of that leaves Australia every year. These profits can only be earned once. We must remove subsidies and enforce the super profits tax like Norway in order to grow a sovereign fund.