On December 23, 2009, Ken Henry presented his panel’s review of the Australian tax system to the treasurer, including its recommendation for a resources rent tax.

Two years, three months and one prime minister later, a bastardised version of that idea was finally passed by the parliament last night. Its parents are Compromise and Opportunism, and they are quite prolific breeders, those two: the legislative output of all parliaments is riddled with their progeny.

Instead of 40% it’s 30%. Instead of being simple it’s a Heath Robinson nightmare. (The English cartoonist is best known for his drawings of outlandish, rickety machinery, often kept together with string and tape.)

The 25% “extraction allowance” reduces the effective rate to 22.5%, it is only levied on coal and iron ore and only on profits above $75 million, it doesn’t replace state royalties as proposed, and in fact royalties paid are credited against the tax, and there is an MRRT expenditure allowance calculated as the long-term bond rate plus 700 basis points.

Even companies with a lower profit than the threshold must behave as if they are paying it, just in case they eventually do, and want to claim the deductions.

And as always there are a whole lot of administrative details that will ensure accounting firms have a good year.

Coal and iron ore miners will now have three taxation regimes: company income tax, ad valorem mine production royalties and now a new resources rent tax on profits that must be calculated quite differently to the other two.

There’s nothing at all wrong with the principle of resource rent taxes. Ad valorem royalties on mine output arguably don’t sufficiently capture the profits that accrue from a boom in prices. Indeed, the Henry Report presented a chart of resource profits and total taxes, showing the tax take falling from 55% to 25% between 2001-02 and 2008-09.

To counter all this profiting at the community’s expense, Ken Henry and his band of idealists proposed a 40% RRT that would add to the (proposed) company tax rate of 25% to achieve a “combined statutory tax rate of 55%”. It would apply to all non-renewable resources and replace all existing state royalties.

Ha! Foolish, utopian Ken. The version that was eventually passed bears little resemblance to what was proposed back in 2009 thanks to the operation of Australian politics. It probably also marks the peak of the commodity price cycle.

And it’s not as if the mining companies are not already paying a decent amount of tax. As it happens Rio Tinto last night released details of the taxes it paid in 2011, the second time it has done so.

Last year Rio paid $4.9 billion in income taxes to the Australian government and $1.59 billion to the Western Australian government in royalties. Taxes paid to all Australian governments totalled $8.4 billion. Total tax paid by Rio to all governments around the world was $10.2 billion.

The Australian government’s response? More please.

But the thing is passed now and iron ore and coal miners need to get their heads around it. The Coalition declared last night that it will rescind the tax in government, but no chief executive should hold his or her breath till then — it’s unlikely an incoming Liberal treasurer will be in any position to cancel any taxes.

*This article was originally published at Business Spectator