June 23

Super ProfitsTax: Not Another Constitutional Problem

We have been writing about the Super Profits Tax from just before the release of the Henry Tax Review. The proposed tax involves the Commonwealth taking 40% of the so-called super profits, but bearing 40% of the losses. 

Hitherto restricted to mining,  the head of The Treasury is now talking of extending it to all businesses, according to a report by David Uren in The Australian (“Henry urges wider profits tax,”  22/6).

ACM’s position is not about the tax itself, but the constitution , the defence of which is our mission.  Accordingly we have raised a number of constitutional and legal issues concerning the tax, and the process under which it was introduced to the nation.

…sovereignty of Parliament….

As an aside during the course of our commentaries, we have observed that if it is enacted and the  Commonwealth  is actually called on to share losses, we see problems.

When and if these are large and incurred by a foreign investor, especially one connected to a foreign government, is likely there will be enormous public pressure for this aspect of the tax to be withdrawn. This fact obviously would be taken into account by investors and leneders. No investor could raise funds on the basis of this.


We had assumed that the government knew this and understood that a future government would be under such pressure. We also assumed the government would have understood that a future parliament  could have changed the tax, removing the guarentee of any losses.

An undergraduate law student would understand this. Early in his or her course, the student would have been introduced to the doctrine of the sovereignty of Parliament which applies absolutely at Westminster and in an attenuated form in Australia.

…no legal advice sought…


But now Glen Milne reports in The Australian (“Rudd did not ask Solicitor-General's advice on mining compo,” 22/6)  the  Prime Minister's office has confirmed the government did not seek advice on whether it could bind future parliaments on this. The tax was intially approved by the so-called "kitchen cabinet" of four senior ministers, Messr Rudd, Swan and Tanner and Ms. Gillard as advised by Dr. Henry. ( Two are lawyers- Mr. Tanner and Ms. Gillard)

Glen Milne observes correctly that iIt is standard government practice to ask the Solicitor-General his opinion of complicated legislation,  especially tax law that breaks new ground.  

He says that this failure to consult will give new ammunition to the major mining companies and the states, which may all consider an eventual High Court challenge to the legislation.

…Senator Brandis critical…

Mining companies have begun to home in on the constitutional concept of parliamentary sovereignty as it applies to the tax.

"Every mining company in the country has told the government the tax credit isn't worth a cracker," one senior executive said.Opposition legal affairs spokesman Senator George Brandis condemned the failure to consult the Solicitor-General.

"It is extraordinary that the government should have neglected to take advice from the Solicitor-General, or senior legal counsel within the Attorney-General's Department, about constitutional issues arising from this tax, not least of which is the fact that minerals are owned by the state crown, and are accordingly subject to state taxes in the form of royalties," Senator Brandis told The Australian.

"The states' taxing powers over their own mineral assets would be usurped by the commonwealth if the scheme proceeds. A competent government would have reassured itself that the scheme could withstand a likely High Court challenge, which has already been suggested by the Western Australia government.”

… legal standing of tax credit….

Glenn Milne reports that there is so increasing concern in the mining sector about the legal standing of the government's promised tax credit representing 40 per cent of company losses.

” To monetise this asset financiers need to have a defined asset recognised in property law. The finance sector is complaining it cannot value this tax credit,” he added.

   …other ACM briefings…  

Super Profits Tax: Massive International Law Claims Likely

Super Profits Tax: Not in a Federation

 Super Profits Tax: Who Owns The Minerals?

 Super Profits Tax: Canberra or the States?

Banana Republic

Treasury head raises eyebrows

Super profits tax: Constitutional challenges likely

The Constitution and the Henry Tax Review 

Super Profits Tax: A Nationalisation Without Compensation?  


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