Governments of resource-rich nations should impose high taxes on mining and extraction
Last updated: April 5, 2019
Something that should be crystal-clear to this generation is that natural resources are limited and precious, and need to be carefully managed. The way natural resources are currently being extracted has led to what is known as the “Resource Curse” – serious harms to resource-rich nations. It seems reasonable to assume that countries with an abundance of minerals and hydrocarbons should have a solid basis for development. However, because of widespread exploitation and corruption, this is not the reality. Dependence on the sale of raw materials creates imbalance and instability in the economy and we need to create a climate that is not reliant on such funds/resources. People and countries are being exploited by a powerful few who are not directly adding value to the lives of the people of the resource rich nation. The environment is being irresponsibly and irrecoverably damaged. High taxes are one of the options being considered in making sure that the benefits gained from natural resources are shared fairly, and contribute to sustainable economic growth and environmental protection.
We would like to emphasize that the intended purpose of any taxes is to do something positive for the people of a nation. Therefore, the governments of tax receiving nations should be capable of turning the tax money to benefit their citizens. Strong economic institutions should be in place to manage the taxes before they are imposed, and should monitor the use of tax funds by governments. Tax revenues would ideally be redistributed to local governments (with the place of extraction getting more compensation, as has been done in places like Italy), as well as earmarked for education and environmental development. This would attempt to offset the permanent loss of a nation’s natural capital with preparation for long term, sustainable growth.
By “high taxes” we mean that the extraction of natural resources should be more heavily taxed than other sectors, such as sales and manufacturing.
High Mining Taxes would Balance the Economy
When nations fail to diversify and instead remain reliant on the export of resources for income, studies show that their economies don’t develop; they get worse. Because the materials being extracted are often far more valuable to nations with highly developed manufacturing sectors, resource-rich nations may be manipulated (through trade agreements, unfair business deals that take advantage of legal flaws) into selling precious resources at low rates. Particularly poorer countries are tempted to seize any opportunity to make a profit, even if that opportunity is a short-term one – but this can hurt them in the long run, since the loss of natural resources is usually permanent. Tax hikes mean that wholesale liquidation of resources will be discouraged. As well, this gives governments themselves an advantage if they get involved in extraction and manufacturing, as Bolivia is doing with its mineral-rich salt flats. The key is to keep extraction industries in check so they will balance with other sectors.
Sustained Overexploitation Leads to Depletion
As technology advances the global population increases, so does the demand for raw materials. The proposed solution will only cause mining companies to cut back on employees and increase prices. It will not allow the companies to consider the environment any more than they do at present. As the proposition has kindly pointed out for us: “the companies will buy less in order to stay within their budget.” Hence, there will be a decrease in profits in the resource sector As a result of this, the government will be unable to reach into their pockets for the environment. So this money that the proposition suggest will be designated to the environment is hardly significant – especially since they have already designated a large proportion of this to economic and educational stimulus. This increased tax to natural resources will cause companies to consider the environment less as they try to maintain a significant profit. If taxes are kept as they are now, mining and extraction companies will be more willing and able to implement policies of ecologically sustainable development. BHP for example, is currently implementing biodiversity projects such as working with the Borneo Orangutan Survival Foundation [[http://www.bhpbilliton.com/home/aboutus/sustainability/Pages/Environment.aspx]].Therefore, taxing resources will not provide significant funds to repair the environment as the prop. suggests but will inhibit companies from internally forming strategies to limit damage to the environment.
Government's Obligation to Benefit Citizens
So how does taxation benefit the citizens of resource-rich nations? According Intermon Oxfam, countries such as Angola, Chad, Nigeria, Ecuador, and Venezuela could use hydrocarbon exports to significantly increase their public spending per capita on education and health by 2015, investing 20% of estimated tax revenues in education and 16 per cent in health. Furthermore, it can help the country in situations like natural disasters. Chile’s president recently proposed a bill to increase a key mining tax in a bid to raise $1b over three years to help fund reconstruction six months after the country suffered a devastating earthquake. (Financial Times)
Taxation only ever works as well as the government does, but governments who are actively working to support the best interests of their citizens will have greater power to manage their economies if they offset the real value of their precious and in most cases, irreplaceable, natural resources and redistribute it.
The point of exploitation for poorer countries is not really relevant as a tax hike will not actually solve the issue, but just try to cover it up. Only by allowing the resource industry to develop naturally in these often younger countries will the problem be solved as business strategies improve over time. Realistically a raise in tax will only lead to further exploitation as companies desperately try to regain lost profits. They will try various and often questionable methods to regain these profits, resulting in less profit trickling down to citizens.
Governments cannot ethically try to improve the situation of the majority of the population if that results in harming the livelihood of a minority. Considering the large number of jobs and careers available in the mining industry, a tax hike which forces thousands into unemployment is not ethically sound. This is true even if jobs are created in other areas. However, this is unlikely as the revenue from a resource tax will not be substantial enough to offset the blow to the economy from a stagnation of development in the resource sector, which naturally occurs when high taxes are imposed [[http://jim.com/econ_growth/index.html]].
High taxes protect domestic resources.
In their second argument, they mentioned the example of Australia where high tax was introduced and actually resulted in the decrease of resource exploitation. Their contradictory evidence strongly serves our argument that as a result of imposing high tax, over-exploitation of resources will be prevented. Also, resource-rich nations are in possession of poor contracts, meaning that the resources these countries sell to the companies are not very expensive. This is an issue because, while business concerns itself with short term benefits resource-rich nations are basically being taken advantage of as precious natural capital is treated like any renewable commodity and sold out from under them. As we have pointed out, natural resources should not be merely individual property. They belong, on some level, to the entire nation, and the nation should be compensated for their loss. There are few ways to compensate an entire nation without involving its government, which is why we suggest that taxes are a reasonable means of giving back to the people.
To quote the prop. 'If time is factored out of the equation, demand for [natural resources]... is virtually unlimited'. This shows that this is a global issue that needs a global response & as such we need a better, more sustainable solution. What the prop. fails to recognize is that because of this demand, slowing development in one country by implementing high tax will only lead to greater development in less regulated countries as the demand for resources never lessens. Our example of Australia simply shows how the threat of high taxes has led to a loss of foreign investors & a loss of income from exports [[http://www.abc.net.au/news/2010-05-03/market-spooked-by-mining-super-tax/419462]].
In actual fact, raising the tax will only increase the loss to nations through unfair commodity prices, because foreign investors will not jeopardise profits due to investor pressure, and will simply look elsewhere. One of the reasons some African countries have experienced loss of foreign investment deals is due to the 'nationalization of resources' [[http://www.unctad.org/Templates/WebFlyer.asp?intItemID=6018&lang=1]].
This is because the concept of using a government to spread the profits across the country is essentially ineffective as foreign investment, employment rates & the cost of living are all positively influenced by the natural growth of the resource sector.
Sterilising Boom Revenues Helps Saving.
The governments cansterilize their boom revenues, gradually introducing into their countries some of the revenues made abroad in special funds. This will not only allow the governments to save the revenue capitals into their economies for the future generation, but also grant them stable revenue streams, as opposed to not knowing about the revenue flow every year. Examples of these sovereign wealth funds include the Government Pension Fund in Norway, the Stabilization Fund of the Russian Federation or the State Oil Fund of Azerbaijan or the Future Generations Fund of the State of Kuwait established in 1976. Recent talks led by the United Nations Development Programme in Cambodia – International Oil and Gas Conference on fueling poverty reduction – point to the need for better education of state officials and energy cadres linked to a possible Sudden Wealth Fund to avoid the Resource curse/Paradox of plenty.
Governments can also encourage citizens to save through lower income taxes. This deals efficiently with the problems of market volatiliity..
The prop’s proposal of sterilising boom revenues is not only highly optimistic, but unrealistic. It is all fair to say that it is working in a few countries, such as Norway, Azerbaijan and Kuwait; however, this does not mean it will work in other countries. Ultimately, the risk of this high tax is enough of a reason to invest in alternate solutions which guarantee sustainable policies and practices within
Governments of resource-rich nations should impose high taxes on mining and extraction.
1. Whether high taxes will result in a healthier economy, and
2. Harms vs. benefits of high tax to the country.
We have explained how high tax will help balance the economy by allowing the government to redistribute a portion of wealth gained in mining and resource extraction, and turn short-term benefits into long-term growth like education and the environment. Opp emphasized the ‘temporariness’ of this income from the resources, but we suggested that no responsible government is dependent on the taxation of resources. If resources do sometime dry up (this doesn’t seem like it would happen too quickly in a resource-rich nation), we believe there would be some opportunity to plan for a future without tax income, as well as ongoing benefits from redistributed income, particularly in education and environmental development. Opp argued that taxes will decrease profits for companies involved in extraction of resources. However, they also said demand for resources is growing, which we believe will probably offset any decrease in profits for the companies. Whether or not taxes dig into companies’ profits, we have demonstrated that it is highly unlikely companies will do less mining and extraction, given the increased demand for resources that exist in limited quantities.
Do the harms of high taxation outweigh the benefits? Opp has argued that it would result in job losses as companies cut down operations. We contended that the same demand that makes their operation sure also means that companies are currently making plenty of profit, enough to sustain even a substantial tax hit. What the Opp has brought up again and again is the danger of high taxes empowering governments that do not work in the best interests of their people, but use taxes for themselves. However, the fact that governments “should” impose high taxes on mining and extraction is not made less by the reality that they also “should” use those taxes to benefit the nation. When we introduced this motion, we explained that before imposing taxes, governments would need to have economic institutions in place that would be able to reliably distribute tax revenue, so this harm does not apply to the plan we have introduced.
We have demonstrated the economic, environmental, and social benefits of passing this motion. We have shown why Opp’s harms are either negligible or nonexistent. Even the “sustainable” alternatives they have offered include high taxes, and are simply variations on how our plan might be implemented. Clearly, the understood purpose of taxing resources is to help the people of a nation. We affirm the responsibility of governments to impose high taxes on resources at their source in order to compensate citizens for the loss of their nation’s natural capital, and to allow governments the financial means to offset environmental harms, and to invest in the development of other sectors of the economy.
Sustainability of such taxes and their effect on sustainability within a country.
The proposition have argued that high taxes will prepare the country for long term sustainable growth. However, we would argue that high taxes do the opposite and in fact, having reduced or relative taxes would, in fact,sustain the growth of the country. Firstly, by having high taxes the profits of domestic producers will be disadvantaged & the implications of a reduction in their profits will greatly have a flow over effect into all other sectors of the community, including manufacturing & sales. Prices will inflate & people will spend less because they will have no money to spend. The proposition have not suggested that domestic producers would be taxed at a different rate & this is simply drive those companies into a deficit. Also, in the recent Global Financial Crisis (GFC), countries that were taxing highly on their resources suffered MORE than those that had no tax or a low tax. Countries such as Australia, that did not place high taxes on domestic producers were the only countries to maintain their economic status. [[http://www.chinamining.org/News/2010-08-24/1282633913d38555.htm]]
By applying high taxes, governments will become reliant on this revenue, despite the fact that most resources, such as coal & copper, will eventually run out. Companies, especially transnational companies (TNTs), will be less inclined to develop & implement sustainable practices as they will have no incentive for change as the reality is that investors place enormous pressure on companies to maintain the GDP.
The opposition has taken our point to the extreme. What we meant about high taxes preparing the country for the long term to promote sustainable growth, is that since the resources are highly taxed, it means companies will stay within their budget. These companies are going to use any means to survive and bring the greatest benefit to their income status when taxes are imposed. According to The Economist, “Mining companies themselves, they have little choice about where to operate but they will inevitably reorganize their financial structures to be tax-efficient.”Because of this, many companies will invest in researching alternatives and renewable energy sources. In this way, they would not only continue to make profit for both themselves and their investors, but would also be more environmental-friendly.
Therefore, what the proposition is advocating for is bringing benefits to the gov and citizens of the resource-rich nations and putting a limit on the usage of the resources so that we use them appropriately in terms of quantity. Also, because the resources are limited, by imposing taxes, companies would have an incentive to use resources that are used on mining and extraction for further developing energy and technology for sustainable growth &preserve the environment—which is the main point of this debate.
The effect a high tax will have on businesses.
Large transnational companies such as BHP Billiton & Rio Tinto will look towards investing in other countries if such taxes were to be implemented in resource rich nation’s like Australia. This will have a negative effect & will scare off big investors which will greatly affect & weaken a country’s economy in areas like housing, infrastructure & employment.
If this tax were to be implemented in all resource rich nations, many of which are some of the poorest nations of the world, the country will become an unattractive destination for both domestic & foreign investment. This will be destabilising to their economies & result in inflation in commodities which will negatively impact all citizens. Australia is a prime example on how such taxes will have an immediate negative impact on resource rich nations. Currently, transnational companies from China are trying to change their resource markets to reduce further alliance with Australian Resources. It wishes to do this to avoid the proposed carbon tax & the MRRT. If a high M&ET were to be added to the current taxes then it will definitely ward off investors. Mr Hugh Tobin, Director of the North Australia Project at the Institute of Public Affairs said that, “the last thing we should be doing is putting in place a new tax on a strong growth sector of the Australian economy that helped us avoid a recession during the GFC" [[http://au.ibtimes.com/articles/195375/20110810/australia-s-resource-boom-not-inevitable-after-all.htm]] Overall the implementation of these high taxes will have a severe negative impact on all businesses involved.
Furthermore, high taxes don’t seem to be a major deterrent to domestic operations. Since the Australia’s Mining Resources Rent Tax (this IS a mining tax) was introduced, BHP Billiton has announced a $9.5 billion investment in new mining projects in Australia.
Mineral and other resources are in high demand on this planet, and that doesn’t seem to be changing in the near future. Even though many countries already place heavy excise taxes on the delivery end for fuels, demand for oil and gas hasn’t decreased, nor have companies found it unprofitable to sell them. Mining and extraction industries have wide profit margins, and they are likely to remain highly profitable even with high taxes. On the other hand, the millions and even billions of dollars in revenue the taxes give governments will make a difference in their ability to invest in other sectors, help their own people, and mitigate environmental harms. Comparing the minor losses of already rich companies and the negligible risk that some of them may find taxes too burdensome, to the benefits the taxes will bring, we can logically conclude that the motion should be passed.
High taxes on mining and extraction would cause many adverse affects on the country and its citizens.
Imposing higher taxes on mining & extraction would mean handing these people more money to misuse. The citizens of that nation would be exploited even further. Far from using this additional profit to improve health and education, some governments will use this money to create larger defence forces to prevent citizens from protesting against injustices. An example of resource profit abuse is Libya, where Colonel Qaddafi has exploited oil profit to create a larger army. Additionally, current resource taxes demonstrate that these taxes do not benefit the population at all because many investors make deals with local leaders to evade tax. Higher taxes will not benefit citizens. On the contrary it will reduce their quality of life even more and further plunge the government into corruption.
Still, the proposition seems to be under the notion that higher taxes will create economic balance within these nations. As seen by the information provided this far, this is false. On the contrary, these nations should be assisted in distributing their current tax income effectively rather than being given more opportunities to create inequalities.
We are not sure who the Opp thinks should be in charge of assisting nations in distributing their current tax income effectively. We did point out already that any taxes are only beneficial to people when they are used in the people’s interest. That is no surprise. But taxes are necessary both to finance desired public spending in a noninflationary way and also to ensure that the burden of paying for such spending is fairly distributed. While necessary, taxes impose real costs on society. Good tax policy seeks to minimize those costs.Sometimes people don’t follow the rules, either, but overall, we still think that rules are useful to have. What we propose is simply this: that high taxes are desirable and necessary not only where minerals and fuels are delivered to the consumer, but where they are extracted. If the governments in question are not interested in the welfare of their people, this is a problem beyond the scope of our motion, and we concede that taxation is not likely to solve it. It's unreasonable to oppose this motion, or any motion that involves imposing taxes just because corrupt governments in countries like Libya don't use money to benefit their people.
Thus, our opposition is missing the major point of this debate, which is the responsibility for each country to protect world’s environment. Before the duty to protect mining no longer becomes responsibility of the government, but of each individuals who are contributing to the damage, it is govt's job to implement preventative actions.
There are better, more sustainable options available.
Opp states that the governments would “discourage those companies from investing in their country’s resources,” which is contradictory to so many statements made previously, since here they are weakening their previous arguments on disads of high mining taxes would be mitigated, with the decreased investments by companies. For example, that statement conflicts with “By applying high taxes, governments will become reliant on this revenue, despite the fact that most resources, such as coal & copper, will eventually run out” or “Realistically a raise in tax will only lead to further exploitation as companies desperately try to regain lost profits. They will try various and often questionable methods to regain these profits, resulting in less profit trickling down to citizens.”
On the other hand, just because mining taxes are higher than taxes on other industries does not mean a huge downturn in mining industry. It will serve only as a means to balance those industries.
Instead of simply forcing companies to take care of the consequences, which often cannot be corrected, the Proposition plan serves to control the environmental destructions, which may be aided by some penalties on consequences.
Domestic and Global impact of such a tax will be too great.
One of the major issues that we as the opposition have been continuously reinforcing is the trust involved in implementing such tax. It is clear that many resource rich nations have a lack of transparency in their governments’ desicions [[http://www.transparency.org/]]. By giving them access to such tax funds we cannot be sure that they will use it to directly help their people. Instead it is more likely that they will be using this tax to further line their pockets as corrupt nations make up well over half of the world’s countries [[http://en.wikipedia.org/wiki/Corruption_Perceptions_Index]] We cannot give such a huge responsibility to societies where corruption occurs every day, rather we need to place pressure on companies to act responsibly.
We would like to second of all make evident that it is not in the Prop's burden to prove how exactly the received tax money will directly go to the people, but to prove that mining taxes should be increased, basing our case on the premise that nations will in fact, use the money for the citizens. This premise goes unattacked by the Opp, and seeing this, we see no problems as to why the citizens will suffer through the motion.
We quote the Opp on this fifth contention, "we cannot give such a huge responsibility to societies where corruption occurs every day, rather we need to place pressure on companies to act responsibly." Firstly, we have stated that we will only be giving this responsibility to societies that will not misuse it. And secondly, they have not given an alternative actor that will put pressure on companies to act responsibly. Having said this, we would like to state that the government itself, which is responsible of its citizens who are hurt the most by mining and extraction, is the best actor to do so.
We need to focus not only on the environment, but also the real life implications on citizens.
Governments of resource rich nations shouldn’t impose high taxes on mining & extraction as doing so would only grant a gov’t more money to abuse. For example, Africa has a large percentage of the world’s minerals & resources however, the “windfall gains reduce a state’s incentive to impose a free and just taxation system and encourages corruption and acquisition of weaponry and thus develops conflicts” [[http://www.africaeconomicanalysis.org/articles/63/1/Rich-countries-and-their-leverage-on-Africa/Page1.html]]. While countries in Africa are among the poorest in the world, the gov’ts of these nations receive sizable funds which are not passed down to citizens. An example of the inequalities that high taxes create can be seen in the Republic of Congo, where most citizens are mired in poverty. However, members of government & their families live in luxury. In 2007 Global Witness revealed how Denis CS Nguesso, son of the President, was spending Congonese oil revenues on personal luxury shopping [[http://www.globalwitness.org/campaigns/corruption/oil-gas-and-mining/republic-of-congo]]. The Prop suggests a high tax would be beneficial in saving the environment without considering the welfare of citizens. However, we as the opposition consider both sides & suggest that it would be much more suitable for governments to encourage and enforce the transparency of mining companies & influence them to invest in sustainable deve
Opp has conceded to the fact that in the status quo, the citizens of many resource rich nations are suffering. We have presented a way to deal with this problem, which directly relates to people and their everyday lives. We have already shown how our plan will help improve people’s education, their environment, and their economic stability.
Furthermore, saving the environment is directly related to helping citizens. A destroyed environment is something that no one wants, and something that brings major negative impacts to everyone, especially to those living in seriously affected areas. Since even the Opp has conceded to the fact that our plan impacts the environment, we can see that the lives of resource rich nations' citizens are likely to be significantly impacted by high mining and extraction taxes.
We need a solution that benefits the majority.
The unfortunate truth is that we live in a volatile global reality, where corruption and mismanagement of government budgets are both a reality for over half the world’s nations [[http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results]]. We have provided evidence on the corrupted nature of many resource rich governments and this proves this is a problem that must be considered when looking at the effectiveness of implementing these high taxes. We have also continuously pointed out that one of the main issues associated with implementing a high tax in resource rich nations is the trust that can be held in their governments. We have raised this question a number of times and all we have heard in response is that “if governments... are not interested in the welfare of their people, this is a problem beyond the scope of our motion”. We feel this is in fact a major problem that must be dealt with prior to establishing a new global norm of high taxation on mining and extraction industries as the negative implications and costs to the majority of resource rich countries will be too great. The realistic social and political impacts that the implementation of such tax will have on ALL stakeholders involved has been considered by us but ignored by the prop.
The Prop have also graciously agreed that by implementing a high tax “the companies will buy less in order to stay within their budget.” This only proves that the implementation of such high taxes will mean that companies will be forced to reduce spending on current technologies and practices rather than encourage investment in developing new, environmentally and economically sustainable ones. The Prop have made several unsubstantiated assertions throughout their argument and they have ignored the realistic negative effects that we have proven to exist. In particular the rise in the cost of commodities would devastate the people of those nations as well negatively effect both import and export profits. There are better ways to achieve what the Prop has proposed and this must be achieved through incentives and pressure on companies rather than simply increasing tax.