Volume based royalty regime not that bad as some think they are

Comments on Stephen Bartholomeusz “The premier factors undermining the MRRT”, 12/02/2013, http://www.businessspectator.com.au/bs.nsf/Article/mrrt-mining-tax-royalties-oakeshott-greens-politic-pd20130212-4U3P3?OpenDocument

Stephen, I think you and many people are mistakenly incorrect on the merits of the current volume based state mining royalty regime and how it practically operates, as well as some of the shortcomings inherent with the profit based resource taxes.

The current state volume based royalty regime is actually not as rigid as you people think it is and it can be changed to suit the actual situation with particular mines, e.g. no royalty or reduced royalty paid in the first number of years of producing minerals and in the late stage where costs are higher.

More importantly, volume based royalty reflects the estimated value of owning the minerals, as opposed to the profit sharing situation under the profit based resources taxes.

To sharpening the point, if companies are so inefficient that they would not produce any profits even though efficient companies would produce, one would have a situation that the value of owning the minerals would be becoming 0.

Further, more efficient firms would be taxed more heavily than less efficient firms in terms of the same minerals, simply because the former generate more profits than the latter do.

Why should owners give away their value to inefficient firms and punish more efficient ones?

Is that fair to the owners or minerals or mining companies?

Further, minerals are generally not renewable products, so a volume based tax can capture that value of non-renewable minerals.

Henry and Treasury people were either naively mistaken or deliberately misleading on this issue on the relative merits of the two regimes.

Other people including many economists and business commentators have been simply too lazy to use their own brain and as a result fallen into the same trap.

So, let's all have a cold shower and have a realistic analysis of the two royalty regimes and not simply ignore the reality and be mistaken hypothesis as actual outcomes.