The Henry Review has done the right thing and has at least reviewed the literature in justifying evaluating of the RSPT. One paper was by Kevin Markle and Douglas Shackelford published by the NBER last year. That paper demonstrated that effective tax rates in the mining industry in Australia were lower than tax rates elsewhere. From what I can see, it is a solid piece of work and exactly the sort of thing that we want governments to take into account when conducting evidence-based policy.
That very same paper prompted an extraordinary attack by Andrew Robb, who is the opposition spokesperson for Finance.
But on Monday morning, the opposition said the bureau paper was actually produced by a ‘graduate student’ in the United states under the supervision of his professor.
‘It’s a very shonky piece of work, it’s amateur hour,’ Mr Robb told reporters in Canberra.
‘Some young bloke’s done his best but it’s a joke.’
The paper found domestic mining companies paid an effective company tax rate of 17 per cent in the period 2003 to 2007. Multinationals in Australia paid just 13 per cent.
Royalties and payroll tax weren’t examined.
Mr Robb said the treasurer should apologise for ‘denigrating the icons of Australian industry solely on the basis of an academic paper by a graduate student from North Carolina’.
Wow. This displays such an astounding level of ignorance that it is beyond belief. First, the paper is co-authored with a leader in the field and so is hardly some isolated bit of student work. Moreover, how does he know who did the work? That appears a baseless assertion. Second, as a result, the paper was put out as a working paper by the NBER. You don’t get to be an NBER associate easily. What is more, the NBER has, as part of its DNA, to place a dispassionate view of the facts without policy advocacy. I should know. I am visiting the NBER at the moment and this gets told to us at every opportunity for anything the NBER publishes. Third, that really means something. The NBER’s existence is to provide evidence to assist in policy-making. It has done it for many decades and is by far the most respected economic organisation in the world. And it is hardly made up of amateurs.
Finally, couldn’t Andrew Robb just read the paper and be specific on his criticisms? He does apparently have an economics background. Perhaps he could explain where the regression equations are faulty and how it could possibly matter that payroll tax is omitted as the important part is to compare tax rates for companies, all of whom are subject to payroll tax and few of whom are as capital intensive as mining. Perhaps he could explain that he now considers royalties a tax? And perhaps he can explain why he only now started critiquing this research that was in the Henry review in the first place?
I am left to conclude that there is little hope for evidence-based policy recommendations coming from the Coalition when the Shadow Minister for Finance is unable to review the evidence. Part of me hopes that some aspiring graduate students will consider entering politics in Australia so as to raise the bar.
[Updated: Sinclair Davidson points out that in the revised version of the paper, the authors no longer report the specific mining industry effective tax rates. They include all results in regressions but only cells with 20 or more observations are reported. I’m not sure why they restrict themselves there and I am not sure why Australian mining falls below that anyway. Over 19 years and we have more than one miner. Sadly, this wasn’t asked of Professor Shackelford in his ABC interview. The point is that we could all use a little more information on that specific number but that doesn’t matter one bit for the debate regarding whether this analysis was credible or not.]