Twiggy (21 page)

Like others, Forrest believed the multinationals had decided before 24 June that removing Rudd as leader and installing Gillard was the only way to get what
they wanted. “We didn’t realise that BHP and Rio had gone behind our backs to do another deal,” Forrest said. “When we were negotiating our solution with Rudd, I was calling BHP and Rio but they didn’t call us back. As soon as Rudd was gone, BHP and Rio didn’t need us, an Aussie battler, anymore. They were doing their own deal with Gillard.” Gillard and Swan later rejected Forrest’s claims that
BHP and Rio backed the coup as “a conspiracy theory” and “a rehashing of old nonsense”.

If Gillard and Swan thought that was the end of the mining tax fracas, they hadn’t counted on Forrest’s absolute hatred of losing. While BHP, Rio and Xstrata suddenly fell silent, content with the bland version of the tax they had secured, Forrest refused to lie down. He threatened to challenge the MRRT
in the High Court and accused the big miners of negotiating a deal that suited themselves at the expense of companies that were reliant on debt financing to develop new projects. Forrest claimed Fortescue would “carry the burden” of the MRRT, which he labelled “economic vandalism”.

Gillard called an election for 21 August and Opposition leader Tony Abbott promised he would repeal the tax
if he won office. Forrest, while still trying to run a major listed company, embarked on a national tour of mining communities in Labor-held marginal seats, in an attempt to drum up opposition to the MRRT. He was waging a one-man campaign against the mining tax. “It was a really gruelling time for Andrew – Nicola was concerned how much work he was doing,” says a friend.

Forrest insisted
all along that he was apolitical and he refused to recommend a vote for the Abbott-led Liberal Party at the election. But he did work very closely with numerous Liberal MPs in fighting the tax. He also put more than $1 million of Fortescue money into setting up a foundation called Keep Australia Afloat, which was run by Liberal Party member Bill Mitchell and aimed to generate broad community opposition
to the tax. Colourful Sydney business identity John Singleton was closely involved with the group, having created a multimillion-dollar advertising campaign against the RSPT that was pulled at the last minute when Gillard came to power. Singleton was a long-time friend of Gina Rinehart, who, like Forrest, had put about $1 million into Keep Australia Afloat.

For a few days after the 21 August
federal election, it appeared as if Forrest’s bid to kill the mining tax had been a success. It was a cliffhanger result and Abbott appeared to be in the best position to become prime minister. A day after the election, with the outcome still in the balance, Forrest said Australians had rejected “irresponsible economic management” and that no party had a mandate to introduce the MRRT. But in
the days that followed, Gillard managed to win the support of independents Rob Oakeshott, Tony Windsor and Andrew Wilkie to cobble together a minority government.

Forrest still refused to give up. He launched a fresh effort aimed at convincing Oakeshott, Windsor and Wilkie to vote against the MRRT legislation when it was introduced into parliament. But his pre-election claim that Fortescue
would “carry the burden” of the new tax had to be discarded when internal modelling showed the company would hardly pay a cent of the MRRT. Ironically, this was because the generous deductions that BHP, Rio and Xstrata had negotiated for themselves would also prove to be of huge benefit to Fortescue.

Undeterred by the fact that he would escape paying the MRRT, Forrest vowed to continue the
fight on behalf of smaller miners, who he said were the victims of a tax that would take from the poor and give to the rich. Forrest was now casting himself as the Robin Hood of the mining industry. The MRRT, he claimed, would affect companies still trying to obtain financing to build new mines. These smaller companies would, proportionally at least, take a much bigger hit than the big miners. “My
heart doesn’t break for Fortescue,” he said. “It breaks for all those other companies that want to be the next Fortescue. The impact won’t be next year. In the long term, with the MRRT, we will look back on the resources sector and wonder what happened. It will be like a slow-growth cancer. It will slowly push jobs overseas.”

Forrest had two other good reasons to persist with the fight: his
bitter hatred of both BHP and Wayne Swan. While Forrest and BHP’s Kloppers had managed to put aside some of their differences in fighting the RSPT back in May, the personal relationship between the two men deteriorated as it became clear that Kloppers was the one with the greater power to influence public policy.

Swan, emboldened by his election victory, was also growing tired of Forrest’s
endless media campaign against the mining tax. From the earliest days of the stoush, it was clear that Swan had little respect for Forrest, even telling him during a meeting in 2010 that if he didn’t like the RSPT, he and his fellow West Australians should simply secede. Swan mocked Forrest’s claims that the MRRT would fail to raise anything like $10.5 billion in its first two years of operation.
He then took the extraordinary step of writing a 4000-word article for the
Monthly
magazine in which he described the anti-tax campaign being waged by Forrest and fellow mining billionaires Gina Rinehart and Clive Palmer as a “threat to democracy”.

In Swan’s eyes, the magnates were attempting to sabotage public policy for reasons of their own self-interest, and they were pocketing a disproportionate
share of the nation’s riches. Swan also pointed out the inconvenient fact that Forrest had admitted to paying no corporate tax at Fortescue (even though he had, in fact, recently done so for the first time). “I fear Australia’s extraordinary success has never been in more jeopardy than right now because of the rising power of vested interests,” Swan wrote. “This poison has infected our
politics and is seeping into our economy. Though these vested interests have not yet prevailed, every day their demands get louder.” Swan’s essay quickly became big news. Never before had a federal treasurer launched a class war against wealthy business people for doing what came naturally: pursuing their own interests to get rich.

Forrest’s over-the-top response to the Swan diatribe illustrated
how paranoid he had become. Within a few days, Fortescue placed full-page newspaper advertisements across the country, headlined “Swan’s attack is unfair, untrue and divisive” and accompanied by a photograph of Forrest with a group of happy Aboriginal employees. The ad, purportedly written by Forrest’s friend and Fortescue deputy chairman Herb Elliott, pointed out that the company was hardly
a tax evader. In fact, it would pay more than $1 billion in taxes and royalties in 2012, and this was expected to climb to more than $2 billion in 2013.

Elliott didn’t hold back. “Andrew Forrest and his team created one of the great business success stories in Australian history,” said the advertisement. “He started with nothing and repeatedly put everything he earned at risk in building
one of the most important mining operations in the world. Andrew epitomises the spirit of what an Australian can do if given a ‘fair go’. For a politician to suggest that he has lost sight of this ‘fair go’ ethic is baffling to those of us who know him best and work with him daily.”

Swan cited the Fortescue ads as further proof of the way in which Forrest was prepared to use his wealth to
influence public policy. “The average punter only gets to vote at the election – they don’t get to take out full-page ads like Mr Forrest has taken out today,” he said. A close ally of Swan’s, Sydney investment banker Paul Binsted, was one of the few in the business community to publicly back the treasurer. “I hardly think that Twiggy Forrest, Clive Palmer or Gina Rinehart represent business,” Binsted
said. “Personally, I see them as being like lottery winners who confuse their good fortune with skill.”

As Liberal MP Malcolm Turnbull – a man who knows a thing or two about making money – accurately pointed out in the
Australian Financial Review
several days later, Swan was himself guilty of bowing down to “vested interests” by allowing the big mining companies to kill off the RSPT, a move
that cost the country tens of billions of dollars in lost revenue. Swan had surrendered to the miners, Turnbull alleged, because he was desperate to retain power. “It is Swan’s job (and the job of all of us in Canberra) to stand up to ‘vested interests’,” Turnbull wrote. “To weigh their claims and respond in the national interest. But in truth Swan assailed [Forrest, Palmer and Rinehart] not because
they asserted their interests, but because they are the most inviting and politically expedient targets in the broader mining industry which so crushingly routed the treasurer and his department over their incompetently designed resources tax in 2010.”

The MRRT finally came into force on 1 July 2012. Nine days earlier, Forrest announced he would fund a challenge to the tax in the High Court
on the grounds that it was unconstitutional. To many, it looked as though he was fighting a war long after everyone else had packed up and gone home. Few could understand his fixation on killing the MRRT when Fortescue would not be liable to pay it for at least another five years and it seemed most others would also be unaffected. Forrest insisted he was fighting the MRRT because of its inherent
“evil”. Paraphrasing a quote widely attributed to the eighteenth-century statesman and philosopher Edmund Burke, Forrest proved he would never knowingly understate things. “All it takes for evil to conquer is for good people to do nothing,” he declared. “We’ve decided not to do nothing.”

Fortescue’s challenge was based on the claim that the MRRT discriminated between the states on taxation
grounds and was therefore in breach of section 51 of the Constitution. But in a written submission to the court, the government said the High Court should see the challenge as an example of Forrest attempting to evade paying the MRRT. “In the end, this case should be seen for what it is,” the submission said. “The plaintiffs do not like the MRRT Act because they may have to pay more for the ability
to harness above-normal profits from carrying on mining in Australia.”

When the case came before the High Court in March 2013, Fortescue’s barrister, David Jackson QC, had trouble winning support from the panel of judges. Jackson argued that because mining royalties – which vary between the states – could be deducted from a company’s MRRT liability, the new tax was being imposed unequally
in each state. Some of the judges pointed out during the hearing that companies were already able to claim deductions that reduced what they paid in company tax, and there was no suggestion that these other commonwealth taxes were illegal. In August 2013, just weeks out from the federal election, the High Court confirmed that the challenge had failed and the tax was constitutional. When the judgment
was handed down in Canberra, Forrest was in Kalgoorlie at the annual Diggers and Dealers mining conference, where he received an award for services to the industry and was fêted by the horde of hopefuls who attend the bash each year. He insisted he had no regrets about the challenge and denied the case had been a waste of Fortescue shareholder funds. Forrest was putting on a brave face, but his
three-year crusade against the MRRT had finally come to an end.

For all his bluster and swagger, however, Forrest emerged from the mining tax war with more credibility than Wayne Swan. That was not difficult. Figures released in the May 2013 federal budget showed that the MRRT – which was introduced to “spread the benefits of the boom” – would raise a pitiful $200 million in its first year
of operation. BHP, Rio and Xstrata paid little or no MRRT in the first twelve months, despite all three making billions of dollars in profits from their Australian operations. The $200 million collected was the equivalent of loose change rattling around in the Treasury coffers. Swan had originally budgeted to collect $4 billion in MRRT revenue in 2012–13, but later revised this down to $3 billion
and then to $2 billion. He blamed lower commodity prices for the huge shortfall and insisted that revenues would improve over time. But most believed that Swan and Gillard had given away far too much to the big miners in the desperate days around their 2010 leadership coup. Another reason for the failure of the MRRT was Swan’s blunder in agreeing to refund mining companies for any increases in state
royalties that were introduced after May 2010 – a move that gave the premiers an incentive to hike up their royalty rates, knowing that the commonwealth would pick up the tab.

On a sizzling day in the middle of February 2013, Forrest was in the Pilbara when a call came through on his mobile phone. On the other end of the crackly line was Andrew Wilkie, one of the independents who had put
Gillard into power and backed the government’s MRRT. Wilkie was calling to apologise to Forrest for ignoring his repeated warnings that the mining tax was a dud.

Wilkie went on ABC radio later that day to demand Swan follow suit and apologise. “I think Andrew Forrest is owed an apology because in the lead-up to the MRRT becoming law, he lobbied very hard the crossbenchers [and] the government,
I assume,” he said. “And he argued there was a fundamental flaw in the tax, and that was the way the depreciation provisions were set up and they unfairly favoured the big three miners. Now, I must admit at the time I was sorely tempted to go with his line of thinking. Instead I decided to trust the Treasury and the government, but he’s been proven completely right.” Wilkie, a former Green
from Tasmania, was not known to be pro-mining and was hardly in the same ideological camp as Forrest. But he was finally conceding his mistake in supporting what many observers regarded as one of the worst examples of public policy-making in Australia for many years.

Forrest might have failed in his quest to steer government policy in his favour, but the experience was nevertheless salutary.
In Forrest’s mind, the fight to end the “evil” of the mining tax was no different to any of the other noble causes he champions – like his crusade to end Aboriginal impoverishment or his indefatigable quest to create nation-building wealth and jobs at his Pilbara mines. After Wayne Swan grouped him with Gina Rinehart and Clive Palmer as one of Australia’s greedy, self-interested billionaires,
Twiggy began privately referring to the trio as “the Good, the Bad and the Ugly”, casting himself as the only honourable mining magnate.