How Much Does it Cost to Bring Down a Prime Minister? The Story of the Australian Mining Tax

Abstract

The bank bailouts and austerity measures that have followed the financial crisis in most OECD countries have overwhelmingly resulted in the transfer of wealth from public to private hands. The financial crisis was heralded as an opportunity for change that would ‘embed’ markets in public control, establishing new institutional forms that better embody norms of stability, equality, and justice. Yet most post-crisis reform has been regressive. Government action the resource sector to socialise resource wealth stands out as an exception. The rapid rebound of commodity prices after their collapse in the aftermath of the financial crisis in 2009, convinced the cash-strapped governments of many resource rich countries to brave retribution from mining companies and seek increased revenue from this source. Some announced that they would increase royalties (like Obama’s 5% royalty charge on hard rock miners), many (like China) proposed higher company taxes for this sector, and others, like Australia, drafted ‘resource rent’ taxes (taxes on high profits, also called ‘windfall taxes’ or a ‘Brown Tax’). This paper describes the political drama that followed the introduction of a resource rent tax. The story of the Australian tax shows how difficult it is for even a well-resourced, rich government to socialise resource wealth. Over AUD $22 million was spent on the communications campaign against the tax. This was the most spent on a single policy issue in Australian political history to this point.

Keywords: Financial crisis, Brown Tax, Mineral Rent Tax, Australia

JEL Classification: L72, F02, H20