COLLAPSING commodity prices have hit BHP Billiton and Rio Tinto so badly that if the government had stuck with the original version of its mining tax, it would be up for billions.
BHP's profit has more than halved. Rio has lost $3 billion. Under either version of the super profits tax, they would owe the government nothing.
But under the tax originally proposed by Kevin Rudd and Wayne Swan they and other mining companies would also be entitled to a refund of the royalties they had already paid state governments.
In Western Australia alone, iron ore royalty payments amount to $4 billion a year. This would have been paid to the companies whether or not they owed any super profits tax, meaning they would have received a cheque from the government.
''Would the government have been worse off in the past six months with the original resource super profits tax? Yes. That's a big fat yes,'' said Chris Richardson, a former Treasury economist now at Deloitte Access.
The tax was revised after Mr Rudd lost the prime ministership in a cabinet room negotiation between the heads of the three big mining companies, the Prime Minister, Julia Gillard, the Treasurer, Mr Swan, and the Resources Minister, Martin Ferguson.
''People are screaming that the revised tax is a disaster because it has hardly raised any money. But they would have been screaming more if we had the original tax - it would have cost the government money,'' Mr Richardson said. ''Much of the bad press about the revised tax has been overdone. Yes, it was a hurried compromise, but any super profits tax would be struggling to make money at the moment because the miners aren't making super profits.''
Mr Richardson is quick to point out that the unconditional refund of state royalties wasn't a design fault of the original tax, it was a design feature. The original tax was intended to make things easier for miners in bad times and to grab more of their cream when times turned good. It was announced at a time when they had plenty of cream. In May 2010, the iron ore price was $US160 a tonne. By September last year it had fallen to $US86 a tonne.
''It wasn't just that prices collapsed, it was that the dollar held up as well,'' Mr Richardson says. ''Miners were hit both ways. But since then, prices have climbed back. We are about to enter a phase where the original tax probably would have raised the government more money than the redesigned one. I am not quite sure that we are there yet, but we are getting there.''
The minerals resource rent tax raised just $126 million in its first six months and is not expected to make anywhere near the $2 billion the government forecast, but Mr Richardson said the rise in the iron ore price meant the government should make more in the second half of the financial year, bringing the total earnings to about $700 million.
''Over the long term the original tax would have raised more than the redesigned one, there's no doubt about that. For one thing, it had a higher rate,'' he said. ''But the revenue would have been more variable. Right now, the government would have been helping miners out.''