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COMMENT: Why today was decisive for the future of Australia’s carbon and mining taxes

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Australian prime minister Julia Gillard today saw off a direct challenge to her Labor party leadership from predecessor Kevin Rudd, but must quickly reunite the party if she wants to move forward with her indirect tax policies on carbon and mining.

The price on carbon emissions (A$23 per tonne) and the minerals resource rent tax (MRRT) are due to start on July 1, so the party does not have long to make sure everything is in place.

Gillard defeated Rudd by 71 votes to 31, and now needs to draw a line under the Labor party leadership issue. Business Council of Australia president Tony Shepherd today said it is time for the government to get back to the job at hand with renewed vigour, adding that today’s ballot must be a catalyst for more focused government.

The leadership struggles leading up to today’s ballot did not provide certainty, and nor do polls suggesting that opposition leader Tony Abbott would win an election if it were held now. He has already confirmed that, if elected, he would repeal the carbon tax that Gillard is implementing.

This air of uncertainty is particularly undesirable as Australia’s Gillard government is trying to not only ensure the introduction of its own domestic carbon and mining taxes, but also assist African countries in formulating indirect tax policies to make the most of the natural resources they are blessed with.

The news last week that South Africa is contemplating the introduction of a carbon tax further clarifies the need for certainty in Australia, as jurisdictions increasingly look to one another for guidance and assistance in best tax practices. Australia will be hard pushed to give credible advice to others in Africa if it cannot even get its own house in order.

Opposition to the Australian carbon and mining taxes is fierce. There have been questions raised over whether the MRRT can pay for itself, or whether the costs associated with it will far outweigh the revenue it will bring in.

And arguments against the carbon tax range from the fact that Australian competitiveness will be hindered if the nation moves ahead in the absence of similar systems in other countries, to the simpler and less debatable principle that Gillard promised not to introduce such a tax before she was originally elected.

Gillard survived that failed promise, and has survived today’s leadership threat from Rudd. With those obstacles out of the way, it seems that nothing can stop her from introducing taxes on carbon and mining. But affected businesses should not despair too much – at least they have certainty in being able to rely on Gillard’s now unerring desire to follow these taxes through to the end.

Further reading:

Gillard’s indirect tax plans still ruffling feathers

Carbon tax continues to inflame Australians

Carbon tax could hit South Africa within a year

Why Australia’s carbon tax will prove ineffective

Why 2012 could be a big year for Australian tax reform

Australian steel company wants government handout over carbon tax

Australia’s mining tax continues to come under fire

Australia’s carbon tax clears final hurdle

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