MRRT and revenue for the states

Comments on Dennis Shanahan “All eyes on Gillard to produce the goods as Labor's vote goes into reverse”, 20/12/2010, http://www.theaustralian.com.au/national-affairs/all-eyes-on-gillard-to-produce-the-goods-as-labors-vote-goes-into-reverse/story-fn59niix-1225973588561

Gillard clearly should stick to her bargain on the MRRT that replaced the flawed RSPT started by Swan and Rudd and ultimately brought down Rudd.

The key must be no or little retrospectivity, that is to say, to make a distinction between existing mining production and future increased mining production.

With that in mind and starting with the agreed MRRT as an intermediate step, the strategy is to design an optimal transition for a mining tax.

The government should not be too greedy in terms of tax grab.

Another key is that the tax mining proceeds should go to the states where they are generated.

The federal government has used the fear of no future revenue for public health in its negotiation with the states, so now we have an increase in mining tax and mining royalties are in the domain of the states, any increased proceeds should go to the states to boost their revenue power to meet future challenges from increased demand for public health.

The Henry tax report should have make this point clear in terms of tax reform to also reform the vertical fiscal imbalance between the two levels of government.

If it didn't, that is a pity and that should be addressed in the planned tax summit next year.