A report from Goldman Sachs suggests that Julia Gillard’s compromise with the mining industry could cost the budget more than $35 billion this decade.
Official figures released by the Government contend that the changes to Rudd’s original Resources Super Profits Tax would only raise $1.5 billion less than the $12 billion first announced.
However, the Goldman Sachs report indicates that the Government has underestimated the level of foregone revenue – which it estimates to be at roughly $3.2 billion within the first two years.
This disparity is expected to broader further into the decade, as miners perpetually increase their production and profits.
Earlier this week Treasury Secretary Ken Henry conceded that the Government had used higher commodity price assumptions to construct the prediction of $10.5 billion, with an injection of $20.9 billion over the next decade.
Comparatively, Goldman analyst Hamish Tadgell found that Rudd’s initial policy would have introduced gains of over $56 billion for this same period.
These figures cast into doubt the ability of the Government to deliver on the promises which were meant to be funded by the revenue garnered from the mining tax.
The new plan will see a taxation level of roughly 22.5 per cent on profits once the new extraction allowance is considered – well off the nonnegotiable 40 per cent originally pushed for by Rudd..
The new resources tax has been met with warm reception from both the mining industry as well as financial analysts, who widely condemned the initial policy.
The compromise is seen as yet another massive capitulation by the Labor Government, and a huge win for the mining industry.