Rechtub asks where will these funds now come from. Well, some is already sloshing around in the mining states due to them raising royalty levels, so those states are OK.

The expected take from the MRRT didn't eventuate due to the guts falling out of ore prices, although opponents claim unspecified concessions to miners to induce them into getting the MRRT flying to be the culprit.

Whatever, somewhere between the forecast MRRT tax take and the sum total of extra state royalties plus 126 million collected is a shortfall to be made up by higher taxes and/or cost cutting. Concurrently, non-mining states will receive more GST at the expense of mining states when the pie is sliced.

Going forward with the MRRT would require the mining states to yield sovereignty over their assets by pegging royalty rates where they are now and, IMO, raising the GST. Pegging royalty rates while commodity prices rise over time will raise mining profits, yielding increasing MRRT collection. The GST rate could be raised above 10% to provide enough money to compensate mining states for foregoing higher royalty rates. The GST rate could even be raised to a level where mining states are fully compensated for abolishing royalties altogether, with an accompanying greater MRRT collection. Raising GST requires offsetting with lower income taxes, paid for by the MRRT collected.

It is my belief miners are happy with royalties because they are way, way lower than will stop them risking a venture. Beyond start-up, they have killed the pig in Australia for decades, whether ore prices are high or low. Some market based arrangement like the MRRT would give Australians a better deal, IMO, but it does look like a bridge too far, even for a flying pig.

And yet the argument, by the government and Ken Henry, has been that royalties are not profit based as a tax would be, therefore being a cost to mining greater than a tax. On that basis miners would prefer a tax, under your scenario.

And yet it seems not.

The story is now out at

http://www.smh.com.au/opinion/politics/how-canberra-got-diddled-20130213-2edhg.html

Here are the 3 stooges - Julia Gillard, Wayne Swan and Martin Ferguson.

More proof that the incompetents have to go before they completely ruin the country.

Don't feel sorry for these idiots they leave with a massive tax-free indexed for life pension if not re-elected.

"Going forward with the MRRT would require the mining states to yield sovereignty over their assets"

and increase GST and further reduce royalties to zero in the hope that eventually the mining states would attain the current status quo. What happens in the meantime?
As royalties are state based and are not set at the same level; would you anticipate the combined MRRT and Royalty regime would -
a. Put a hit on all the mining companies - some more than others because they currently pay less royalties?
b. Put a hit on some mining companies but not others? or
c. Give a free kick to all mining companies by having a lower overall rate?

Of course increasing GST does not only affect the lower paid. It drives up prices.The mining states would have an increased cost to bear because of higher infrastructure costs; unless the federal government assumes that mantle. That of course would reduce the return to the states.

Interesting link Phillip.

It is typical of this gvernment, as to them, passing legislation is a priority and it appears that they move on to the next piece of legislation, while icompitenly goimg about trying to implement what they have already passed, only to fail miserably time and time again.

While I accept that passing legislation is an important role of governments, I liken this government to that of building a new house.

You can obtain the best designed plans, then engage the worst builder, and the result is a failure.

Back to the topic, these three are living proof of just how incompitent, not to mention arrogant they are.

They no doubt had an agenda for this meeting, and that was to rid the airways of the negativity being publicized by the miners, but to do so, they thought it would be easier to not have the smartest people attend.

It was all about saving the governments reputation, not about doing the right thing, not that I am a fan of the mining tax I might add.

http://au.news.yahoo.com/thewest/a/-/article/16141773/rio-tinto-posts-first-loss-pays-no-mining-tax/

Rio Tinto has confirmed that it did not pay MRRT in 2012. "Given that the MRRT is a tax that kicks in when prices are high, you certainly won't expect to have an MRRT liability when commodity prices are low," Mr Walsh, Rio Tinto's new CEO said.

"Rio's boss says the tax is functioning as it was designed, which is to tax "super profits" not "normal profits....."

Swan struck out when Treasury crystal-ball forecasts of ore prices failed. Result, he wears the egg on his face and learns not to budget using a volatile tax, hence my suggestion to quarantine MRRT proceeds in the Future Fund.

Given federal gov't revenue was a forecast 376 billion, isn't a 2 billion dollar cock-up over the MRRT contribution a storm in a teacup?

The disparagement of Swan over by the Coalition is a smokescreen for itself being too in bed with miners, watching by as our mining wealth disappears for too little return, and for being at the ready ready to repeal the tax.

The vitriolic denigration of the MRRT and Swan here on OLO is unaccompanied by any better suggestion of how Australians can benefit more from the depletion of our minerals than we did under the Howard government.

We have states competing for mining investment as if we live in different countries, undercutting each other to the detriment of all Australians. IMO, the states acting this way is reason enough for federal action, be it by a super-tax or otherwise. What's the Coalition got other than repealing every reform of the last five years?