Making Big Corporations Pay Their Share

Background

The pandemic was tough for a lot of Tasmanians. According to the Australia Institute, the premature ending of the JobSeeker supplement forced 7000 Tasmanians in to poverty.[1] Meanwhile, JobKeeper was used by big corporations to fund their profits and pay out dividends.[2]

In Tasmania, Governments have continued to allow their wealthy mates to profit from Tasmania’s natural assets and to rip money out of disadvantaged communities. The Richest 250 Australians saw their wealth increase by 25% in 2020.[3] This increase in the concentration of power and wealth is crippling our democracy and our economy.

Mining, gaming and fish-farm companies all operate as a result of being given exclusive licences by the Tasmanian government. Developers are able to gain windfalls from simple rezoning decisions. But the public is not getting a fair return from these companies. As a result, access to quality public services is declining and money is being taken out of our community.

Increasing taxes and fees on these corporations will raise an additional $1.23 billion over the forward estimates. This additional revenue can help fund a transition to make Tasmania a fairer, cleaner and more prosperous place.

Figure 2.1.1: Corporate Tax Plan, forward estimates

Revenue ($m)

2021-22

2022-23

2023-24

2024-25

Forward estimates

Mining

69.6

67.4

66.6

66.6

270.2

Gaming

0.1

0.1

0.1

0.1

0.5

Fish farming

80.0

80.0

80.0

80.0

320.0

Betterment tax

160.0

160.0

160.0

160.0

640.0

Total

309.7

307.5

306.7

306.7

1,230.7

Mining

Tasmania is too generous to mining companies. We charge some of the lowest royalties on mineral extraction in the country. Over the last ten years, Tasmania has charged 60% less in royalties on mining company profits than the rest of the country.[4]

If Tasmanian royalties had been set at the average of other Australian states and territories for the last decade, Tasmanians would be $490 million better off today.[5] Instead, big mining companies and their foreign owners have been profiting from their cheap access to resources that are owned by all Tasmanians.

Figure 2.1.2: Royalties charged on mining company gross profits, 2010-11 to 2019-20[6]

Mineral resource prices have boomed since the pandemic hit. Iron ore prices have skyrocketed as have most of the soft metals that Tasmania specialises in.

Figure 2.1.3: Tasmanian mining output and recent price spikes[7]

Mineral

Tasmanian Production (2019-20)

% of National Production (2019-20)

Price ‘spike’ (2021)

Copper

1.5

kt

0.2%

52%

Gold

2.6

t

0.8%

32%

Iron ore

2,682

kt

0.3%

129%

Lead

48

kt

9.6%

-4%

Silver

99

t

7.4%

52%

Tin

7,181

t

95.7%

45%

Zinc

96

kt

7.2%

12%

Of particular note is the price of tin which is up 50% on pre-pandemic levels and is nearing the record high levels reached 10 years ago. Bluestone Mines Joint Venture in Zeehan produces 95% of Australia’s tin and is one the largest tin mines in the world.[8] This company is 50% owned by the Yunnan Tin Group of China which means that half the benefit of this commodity boom is going offshore.

Figure 2.1.4: Price of Tin[9]

The Tasmanian people missed out on the benefit of the last commodities boom. Unless we act now we’ll miss out on the benefit of this one too.

Figure 2.1.5: Revenue from resource rents and royalties, forward estimates[10]

Resource rents and royalties ($m)

2020-21

2021-22

2022-23

2023-24

Forward estimates

Current projections

46.2

46.4

44.9

44.4

181.9

Additional revenue

69.3

69.6

67.4

66.6

272.9

Total

115.5

116.0

112.3

111.0

454.8

Increasing Royalties and rents charged on mining companies by 150%, or two-and-half times the current rates,[11] would bring Tasmania in line with the national average and ensure that everyone enjoys the benefit of the current boom in commodity prices.

Mining Royalties

Policy 2.1.1

We will increase mining royalties and rents by 150%, in line with the national average.

Increasing resource rents and royalties to the national average would generate an additional $270 million in revenue for Tasmania over the forward estimates.

Mining is an important employer in Tasmania and the Greens want it to continue to be that way. But the fate of jobs in mining is largely out of the hands of the state government.  Figure 2.1.6 shows that employment in mining has been relatively consistent over the last decade. What changes that there have been in mining jobs closely follows changes in commodity prices. When prices go up there are more jobs, and when prices go down there are less jobs.

The Greens plan to increase royalties to national average would see royalties increase from about 4% of mining gross profits to 10% of mining gross profits.[12] This will have little bearing on investment and production decisions in comparison to the forces of global commodity markets.

Figure 2.1.6: Jobs in mining in Tasmania and Commodity Prices, 2010-11 to 2019-20[13]

Gambling

Tasmania’s gambling industry is basically run for the benefit of one family. Federal Group is a private business run by Greg Farrell and owned by the Farrell family. The Farrell family have become obscenely rich thanks to Federal Group’s monopoly over gaming in Tasmania. Federal Group has an exclusive licence to operate poker machines and keno in Tasmania, and controls both of Tasmania’s two operating casinos.

The Family have been estimated to be worth $745 million in total.[14] Greg Farrell himself has been estimated to be worth $564 million.[15] This one family is richer than the poorest 40,000 Tasmanian households combined.[16]And they have become rich by taking money from the poorest Tasmanian families.

The Greens plan is to get pokies out of pubs and clubs to stop so much damage being done to so many people in our community. But we also have a plan to reform gaming taxes that would stop the Farrell family from taking so much money out of the State.

Despite being one of the poorest states, Tasmania taxes poker machines, table games at casinos, and keno less than most other states (Figure 2.1.7).

Figure 2.1.7: Existing tax rates on the take from poker machines, table games and keno, 2017-18[17]

The Greens plan will replace existing gaming taxes with a simple schedule of taxes on the money taken out of the community by the gambling industry. The tax rates will target poker machines, which are the most harmful form of gambling. They will also maintain a revenue neutral position for the State government after the removal of poker machines from pubs and clubs.

Figure 2.1.8: Gaming tax rates and gaming tax revenue projections, 2021-22[18]

Tax rate

Expenditure ($m)

Revenue ($m)

Gaming Machines

50%

82.7

41.3

Table Gaming

10%

10.1

1.0

Keno

10%

35.2

3.52

Total Gaming

 

128.0

45.9

The Greens plan will ensure Tasmania leads the country in recouping a fair share of the money that is taken out of the community by the gambling industry. This will ensure that Tasmania can fund the sort of public services needed to support our community, including those funded through the existing Community Support Levy.

Figure 2.1.9: Gaming revenue, forward estimates[19]

$m

 2021-22

 2022-23

 2023-24

 2024-25

Forward estimates

Table Gaming

1.0

1.0

1.0

1.0

4.0

Gaming Machines

41.3

40.6

39.9

39.9

161.8

Keno Gaming

0.3

0.3

0.3

0.3

1.1

Casino Licence Fees

3.7

3.7

3.6

3.6

14.7

Total Casinos

46.4

45.5

44.8

44.8

181.5

 

Keno Gaming

3.2

3.2

3.1

3.1

12.7

Keno Unclaimed Prizes

0.3

0.3

0.3

0.3

1.2

Total Hotels and Clubs

3.6

3.5

3.4

3.4

13.9

 

Total Gaming

49.9

49.0

48.2

48.2

195.4

 

 

 

 

 

 

EXISTING BUDGET PROJECTIONS

 

Casino tax and licence fees

49.8

48.9

48.1

48.1

194.9

 

 

 

 

 

 

Additional revenue

0.1

0.1

0.1

0.1

0.5

Every Australian state and territory now has a casino. While in the past, Wrest Point may have been a drawcard for tourism, these days Tasmania’s natural beauty and food and culture are far bigger attractions.

The most recent government commissioned study of the impact of gambling in Tasmania said “there is no evidence to suggest that interstate or international tourists are attracted to Tasmania purely, or mostly, for the purposes of attending the casinos.”[20]

Casino Tax Rates

Policy 2.1.2

We will increase casino tax rates to level that covers lost tax revenue from banning pokies in pubs and clubs.

Fish farms

The unchecked expansion of Tasmania’s salmon industry, unsustainable stocking levels, and approval of farms in inappropriate locations has come at great. Parts of Macquarie Harbour have been turned into a ‘dead zone’[21], and threatened species such as the Maugean skate, handfish species, and the Gunn’s screw shell have been pushed closer to extinction.[22] Tasmanian salmon has doubled in size over the last decade and now accounts for over 60% of the value of all aquaculture in Australia.[23]

The Greens plan is to put a moratorium on the approval of new fish farms or expansion of existing fish farms, to overhaul the regulatory system to stop fish farms from damaging the marine environment, and accelerate the transition to more sustainable, land-based operations. In the meantime, fess paid by companies need to be increased.

Farmers of land have to buy or rent property on the open market to earn their money. But the majority of Tasmania’s fish-farmers profit from publicly owned waterways that they are given access to by the State government.

The Tasmanian salmon industry is dominated by three companies: Tassal, Huon and Petuna. In combination, the gross value of annual production is around $800 million.[24]

Yet the public sees little of this money. Data on the amount paid by salmon farmers in licence fees and levies to the State government is difficult to find, but has been estimated at no more than $3 million per annum.[25] That’s less than 0.5% of the value of production. This is a paltry amount.

Figure 2.1.10: Aquaculture industry in Australia by value, 2010-11 to 2017-18[26]

Fish farming companies need to be made to pay a much greater return to the public who are the owners of the waterways that they profit from.

The Greens would ensure this by introducing a 10% royalty on the gross value of salmonoids grown in State-owned waters. This is estimated to generate an additional $80 million per annum for the people of Tasmania.[27]

Fish Farm Royalties

Policy 2.1.3

We will introduce a 10% royalty on the gross value of salmonoids grown in state-owned waters.

Land rezoning

Rezoning of land can make a land owner or developer millions of dollars by changing the allowable use of that land to something of higher value – usually for housing. With this power comes the opportunity for corruption. In Australia, the nexus between governments, developers and the property industry centres around decisions to rezone land to residential use.

Figure 2.1.11: Total value of land in Tasmania, 2010 to 2021[28]

A betterment tax is a once-off tax applied to the ‘windfall gain’ enjoyed by property owners as a result of a change in the allowable use of land, usually through rezoning. It ensures that if a land owner enjoys an exceptional increase in wealth as a result of a decision of a government then the public shares in that benefit.

Such a system is already in place in the ACT. Whenever there is a change in the allowable use of land that results in an increase in valuation, the ACT government applies a 75% once-off tax on that increase in value.[29] It has been estimated that if all state governments adopted this approach then they could raise a combined $11 billion in additional revenue per annum.[30]

It is estimated that introducing a similar tax in Tasmania would generate an additional $640 million over the forward estimates.[31] A betterment tax would ensure that any decision to allow developers to benefit from soaring land prices is of benefit to all Tasmanians.

Betterment Tax and Rezoning Register

Policy 2.1.4

We will introduce a 75% betterment tax on any increase in the value of land that results from a change in the allowable use of land. We will also establish a state register of land rezoning decisions that includes the location of land rezoned, and the value of the land before and after rezoning.

 



[1] Holmes, A, JobSeeker cut plunges 7000 more Tasmanians into poverty, according to the Australia Institute, the Examiner, April 2021.

[2] Hutchens, G, Were JobKeeper payments supposed to flow to shareholders?, ABC News, February 2021.

[3] The Australian Business Review, Rich 250 List, 2021.

[4] ABS 5220.0, Australian National Accounts: State Accounts; Tasmanian Budget Papers; Deloitte, Estimates of royalties and company tax accrued in 2018-19: Mineral Council of Australia, May 2020. (Total resource royalties and rents. Gross profits are gross operating surplus and gross mixed income. This provides a measure to compare state royalties proportionate to mining activity.)

[5] Ibid. (National royalties for 2019-20 derived using the ratio between Tasmanian royalties and rents in 2018-19 and 2019-20.)

[6] Ibid.

[7] Office of Chief Economist, Resources and Energy Quarterly Historical Data; London Metals Exchange; Index Mundi. (Price spike derived using the spot price in April 2021 above the average of the previous five years.)

[8] Office of Chief Economist, Resources and Energy Quarterly Historical Data.

[9] London Metals Exchange.

[10] Tasmanian Budget Papers. (Current projections were updated over the forward estimates to reflect the $6.3m positive variation for revenue from mineral royalties detailed in the Revised Estimates Report 2020-21. Assumes no change to production, or the ratio between net sales and profits.)

[11] Mineral Resources Regulations 2016. (Royalty on net sales (N) would increase from 1.9% to 4.75%. Royalty on profit (P) would increase from 40% to 100% of P2/N. The maximum royalty limit of 5.35% of net sales would be lifted.)

[12] ABS 5220.0, Australian National Accounts: State Accounts; Tasmanian Budget Papers; Deloitte, Estimates of royalties and company tax accrued in 2018-19: Mineral Council of Australia, May 2020

[13] Office of Chief Economist, Resources and Energy Quarterly Historical Data; ABS 8155, Australian Industry.

[14] Australian Financial Review, Rich 200, 2019.

[15] The Australian Business Review, Rich 250 List, 2021.

[16] Australian Financial Review, Rich 200, 2019; ABS 6523, Household Income & Wealth. (Conservative calculation derived using national wealth distribution by decile, adjusted by the difference between the mean wealth in Tasmania and the national average.)

[17] Australian Gambling Statistics, 1992–93 to 2017–18, 35th edition.

[18] Tasmanian Budget Papers; Tasmanian Liquor and Gaming Commission, Annual Report 2019-20.

[19] Tasmanian Budget Papers; Tasmanian Liquor and Gaming Commission, Annual Report 2019-20. (Assumes 25% of current expenditure in hotels and clubs on gaming machines transfers to casinos.)

[20] ACIL Allen Consulting et al, Fourth Social And Economic Impact Study Of Gambling In Tasmania (2017) – Volume 1: Industry Trends And Impacts, January 2018.

[21] ABC News, Environment watchdog orders Tassal to destock salmon lease in Macquarie Harbour, February 2017.

[22] Marine Life Network, Submission to the Legislative Council Inquiry into Fin Fish Farming in Tasmania, 2019.

[23] Department of Agriculture, Water & Environment, Australian fisheries and aquaculture statistics 2018.

[24] Department of Agriculture, Water & Environment, Australian fisheries and aquaculture statistics 2018; Department of Primary Industries, Parks, Water and Environment, Tasmanian Agri-Food Scorecard 2018-19.

[25] The Australia Institute, Making Mountains out of minnows: Salmon in the Tasmanian Economy, July 2019.

[26] Department of Agriculture, Water & Environment, Australian fisheries and aquaculture statistics 2018.

[27] Department of Agriculture, Water & Environment, Australian fisheries and aquaculture statistics 2018; Department of Primary Industries, Parks, Water and Environment, Tasmanian Agri-Food Scorecard 2018-19. (The average value of production from 2016-17 to 2018-19 was $791m p/a. This was rounded to $800m to avoid false precision.)

[28] ABS 5204: Australian System of National Accounts; ABS 6416: Residential Property Price Indexes: Eight Capital Cities. (2021 figures have been derived by extrapolating the growth in Hobart house prices in Q3 and Q4 2020 over the remainder of 2020-21 and applying this rate to the entire state.)

[29] Planning and Development Act 2007.

[30] Murray & Frijters, Game of Mates: How favours bleed the nation, 2017.

[31] Murray & Frijters, Game of Mates: How favours bleed the nation, 2017; ABS 5204: Australian System of National Accounts; ABS 8731: Building Approvals. (Derived by calculating Tasmania’s proportion of the $11B national potential using the average annual difference between Tasmania and the nation over the last decade in residential land price growth and dwelling approvals.)