40% Tax

[Disco44]

How's this for an idea for the Feds...instead of taxing the 40% on the miners as is proposed,put the 40% on the banks and fuel companies.
Miners are responsible for 1000's upon 1000's of jobs,the Banks and fuel companies employ very few in comparison but rip the Australia residents off big time and give virtually nothing back.
Anyone agree?

[Dorko]

Yep... they dont realise how much perth needs the mining giants... it runs the state!


Dorko

[Rangier Rover]

How's this for an idea for the Feds...instead of taxing the 40% on the miners as is proposed,put the 40% on the banks and fuel companies.
Miners are responsible for 1000's upon 1000's of jobs,the Banks and fuel companies employ very few in comparison but rip the Australia residents off big time and give virtually nothing back.
Anyone agree?

It's not good for investors and consumers in any way or form either way:( Other than export to some extent, the cost will be cast onto the consumer that already has climbing interest rates to cope with. I leave it here as cant really agree with any of the resent out comes:(

[clean32]

ok can some one exsplane to me how a profit tax of 40% would efect local employment

[clean32]

It's not good for investors and consumers in any way or form either way:( Other than export to some extent, the cost will be cast onto the consumer that already has climbing interest rates to cope with. I leave it here as cant really agree with any of the resent out comes:(

posted about the same time,

Who are the investors? is there a difference between who the investors are and who the backers are?

Who are the majority consumers that will be effected?

[Disco44]

It's not good for investors and consumers in any way or form either way:( Other than export to some extent, the cost will be cast onto the consumer that already has climbing interest rates to cope with. I leave it here as cant really agree with any of the resent out comes:(

Well one answer to that is for the feds to re-regulate the banks especially.Everything was going ok until that industry was deregulated .Not one federal government since deregulation has had the guts to stand up to them since.The same with the fuel companies our price should be fixed to New York not Singapore as Keating did.

[Disco44]

ok can some one exsplane to me how a profit tax of 40% would efect local employment
Check out what Santos is doing in Queensland as of today..The LNG pipeline which employs 1000's just in it's construction and also the construction of the new refinery at Gladstone has ground to a halt...just threats I don't know we will just have to wait and see.
John.

[Rangier Rover]

posted about the same time,

Who are the investors? is there a difference between who the investors are and who the backers are?

Who are the majority consumers that will be effected?

As you will have noticed in the past, I tend to not get into any debates as we have to many nice people from different walks of life here. I'm a very broad minded genuine aussie so I'll leave it here. How ever I'm also a mining investor, Big energy user as have a small back yard;)
I'll let the others pick this up:)

[Lotz-A-Landies]

IMHO

Firstly the offshore oil and gas producers (oil companies) already get a similar tax. Why should miners get treated differently?

2nd. It is only a tax on the bit remaining after all other costs, all other royalties and the first 6% of profit has been taken out so what is happening is that there is 30% tax on the first whatever. Then comes 6% of how many billions profit they made with NO Tax then on the remaining 94% of their billions of profit they lose 40% super-tax so that is actually "of all the billions of dollars of profit they make, their investers and shareholders get to keep 62.4% of it!"

3rd About the claim it is nationalising mining companies. If I buy some land, build a factory, buy some raw materials use my factory and the labour of the employees I pay, pay the duties and taxes I would expect to keep the profits. Yes - that sounds O.K.

The same would be true if I leased the factory, I could keep the profits.

However mining companies are not the same as the above cases. Mining companies are something like this: they think there is something underneath someone else's factory, they come in, dig up all the concrete and sell it to road building companies, pull down the shed and sell all the materials to other people to build sheds and cars, pay the same duties and taxes as the factory owners above, then when they've sold all the road building materials and all the materials in the shed, they run a bulldozer over the property to flatten it out (even though it had hills before) and plant a couple of trees then hand it back to the factory owner and move on.

We, the Australian people, are that factory owner, and we should get to keep some proportion of the factory that we used to own. That is what that super tax is all about.


<snip>
Who are the investors? is there a difference between who the investors are and who the backers are?
Who are the majority consumers that will be effected?BTW, a lot of the investors are actually our superannuation funds, so yes we are impacted, however if the super-tax is also used on Australian infrastructure it will save on us being taxed that little bit extra to pay for the infrastructure.

Backers usually refers to banks, who loan money and get the first slice of the pie should the project fail.

Diana

[clean32]

im not being a smart ass here, i am interested but I have no knowledge of the Australian mining industry apart from recently casting my eye over some numbers. a cursory glance interesting gives me the impression that Australian economics mimic or versversa RF economics, in that most of the money government spends comes from one place 18% and 21% respectively.
I have some more thoughts that i need to get my head around, things like the economics of getting the stuff out of the ground is basically the same regardless of where you are in the world ( baring extreme weather) so that leaves security finance and logistics.

Security well hay its sleepy old Australia that’s a win hands down.

Logistics, to Asia that’s a win again

Finance, well there may be a point here, investors can be jumpy and any change in government policy can change there view.

But business is business, its not like you can just go dig a hole anywhere?
profit tax just means that the companies will borrow more ( don’t pay tax on interest and debt) which leads to investment and more jobs.

and as i understand the Australian mines are financed offshore as well as having a large part of there shares held off shore. I see at first glance that a tax may lead to more jobs and better retention of the wealth in Australia.

But as I said that’s just at a first glance

[Sprint]

I cant help but wonder what the union faithful are thinking now that the Labor government has bent them over and ****** them yet again

I guess it'll be forgotten by the next election though!

Oh how I wait for the first of the dickhead miners up here to start whinging about it.....

[twitchy]

ok can some one exsplane to me how a profit tax of 40% would efect local employment

Simple, a lot of smaller coal companies & even some of the big ones are now starting to go off shore. No coal mines, no work for smaller companies...... starting to see the problem ;)

[JDNSW]

I am afraid Diana, that like the federal government, you do not know how mining works.

Exploration staff propose a project, based on available knowledge. Before this project proceeds to the next stage, estimates or calculations are made of the costs and the income expected. This "profit" is then discounted to account for the time expected between the expenditure and the profit (this discounting is very sensitive to predicted interest rates!) and then (this is the important part) factored for the risk in the project.

This procedure is repeated at each stage - acquiring exploration acreage, planning an exploration project, detailed drilling of a prospect, initial development, mine expansion.

Now because exploration is not an exact science, and because miners have no control over product prices, and other factors, only some of the projects will make the estimated profit (this is the risk factor). Others will lose money, in some cases, a lot (see for example the BHP WA nickel project). It is necessary for the successful ones to be very successful to make up for the ones that fail. (Taking the mining industry as a whole, it is not a high profit industry - a bit like many other activities - you only notice the successful ones!)

The government is now proposing to take a large proportion of this "super profit". This raises the bar for projects to proceed even from the very first step. Only projects which are calculated to be "super super profitable" (before tax) can now proceed to even the first step. Actually it is even worse than that. One of the risks taken into account is what is referred to as "sovereign risk", the risk that the government will change the rules. Australia has for many years been rated as having very low sovereign risk - it has just got a lot higher, and will remain high even if the government were to back down (this time!).

The inevitable result will be a reduction in exploration, development and expansion of mining in Australia, similar to that seen in offshore petroleum with the introduction of the offshore resource rent tax. Only the lowest risk and quickest return projects will proceed. How big is the reduction will depend on the details of the legislation. There is a few years before the tax comes in, but it should be noted that some mining projects may be twenty years between initial expenditure and first profit.

As a final comment, it should be noted that the biggest payer of company tax in Australia is BHP. Unlike many manufacturers and particularly service companies, mining companies rarely are able to use transfer pricing to avoid tax (saw a few days ago that Google Australia manages to pay company tax in Ireland at a much lower rate than here!)

John

[Captain_Rightfoot]

Well one answer to that is for the feds to re-regulate the banks especially.Everything was going ok until that industry was deregulated .Not one federal government since deregulation has had the guts to stand up to them since.The same with the fuel companies our price should be fixed to New York not Singapore as Keating did.

IMHO this will be one of the biggest mistakes of our time. When the crash hit our banks were insolvent. They were unable to rollover their funding. Aussie banks get nearly half of their funds from OS. This debt is relatively short term, which means it is constantly being rolled over.

So, after a few phone calls the government guaranteed our banks. This enabled them to get capital and go on one of the biggest lending sprees in our history (I suspect it was an unofficial condition) encouraging poor saps into property to stabilise the housing and construction markets.

Thing is, as credit markets stabilised the banks didn't need the guarantee they just took it off the table and said "if you need it again it's there" - nudge nudge, wink wink. So, the banks now know they can't get into trouble so they are having a good old time doing whatever makes them profits and their CEO's bonuses.

They haven't built up their reserves or addressed their funding issues in any meaningful sense. So, should there be another seizure of the credit markets, or a deterioration in the property market {gasp} then the tax payer will be on the hook. Given we have over one trillion in mortgage debt alone it wouldn't take much for our government to be saddled with substantial debt. Yet this is not mentioned.

Oh yeah, the mining tax is a real stupid idea too. Endless growth in China is just taken as a given. Already there are signs that their crash is a happening. I see our mining and banking industries as increasingly vulnerable. In short, those are some dark clouds forming...

[incisor]

john

bearing in mind i have no idea of how this all works..

the tax is only part of a bigger package they are saying.

how come many are saying this could be a good thing for the smaller players and could lead to a lot more exploration because of the incentives?

[JDNSW]

john

bearing in mind i have no idea of how this all works..

the tax is only part of a bigger package they are saying.

how come many are saying this could be a good thing for the smaller players and could lead to a lot more exploration because of the incentives?

As I said, the overall effect depends on the details. The exploration incentives are a way of reducing the overall effect, and will favour the smaller companies which have no current income to pay for their exploration. But with mining the big expenditure comes with development, not exploration, and the risks do not go away, just a bit less. If the package was tax neutral, which it will not be, it would simply put new or unsuccessful miners on the same level as the successful ones. Perhaps this is not such a good idea, as the successful ones are more likely to be the ones who operate more effectively.

Put simply, if you take money out of the industry, the industry will have less to spend, and will spend it where they have at least a chance to make up for the failures. And, without having access to the figures, I would think that over the longer term the vast majority of exploration expenditure in Australia has come directly from mining profits, and most of the rest from capital subscribed in the hope of "super profits". Without the possibility of "super profits" nobody is going to put up capital in anything as risky as exploration. Let's face it, most exploration is non-productive. A government subsidy will help the smaller players, but not when they need to raise more capital or (as they usually do) want to farm out a project to a large company with the money (from "super profits") to develop it.

John

[JLo]

and the ressources are finite - once they are gone they are gone and so will the miners and the jobs. All the profits will be overseas because the companies are owned o/s e.g. China.

Can't see any issue in bringing it into line with the petroleum extraction part of the rersources sector.

[Chucaro]

I guess that this fellow know a bit more than many of us about mining and profits :)
'Hysterical' mining industry claims 'complete rot' (http://www.abc.net.au/news/stories/2010/05/07/2893468.htm'section=justin)

In the way that I see is: how many people will be affected by the 40% tax and how many millons in generations to come wiil be better of in the future with the superanuation.
"Think today to be able to live tomorrow"
Whay I do not like about mining in the present form is that they milk dry Australian assets and then they take off and live the future generations with a big hole in the ground....nothing more. :(
Stop selling the raw material and export value added good.

[Disco44]

IMHO this will be one of the biggest mistakes of our time. When the crash hit our banks were insolvent. They were unable to rollover their funding. Aussie banks get nearly half of their funds from OS. This debt is relatively short term, which means it is constantly being rolled over.

So, after a few phone calls the government guaranteed our banks. This enabled them to get capital and go on one of the biggest lending sprees in our history (I suspect it was an unofficial condition) encouraging poor saps into property to stabilise the housing and construction markets.

Thing is, as credit markets stabilised the banks didn't need the guarantee they just took it off the table and said "if you need it again it's there" - nudge nudge, wink wink. So, the banks now know they can't get into trouble so they are having a good old time doing whatever makes them profits and their CEO's bonuses.

They haven't built up their reserves or addressed their funding issues in any meaningful sense. So, should there be another seizure of the credit markets, or a deterioration in the property market {gasp} then the tax payer will be on the hook. Given we have over one trillion in mortgage debt alone it wouldn't take much for our government to be saddled with substantial debt. Yet this is not mentioned.

Oh yeah, the mining tax is a real stupid idea too. Endless growth in China is just taken as a given. Already there are signs that their crash is a happening. I see our mining and banking industries as increasingly vulnerable. In short, those are some dark clouds forming...

Thanks for that answer Capt. but are not you and I saying the same thing?
I understand that the Feds propped them up with sureties but IMHO because they are self regulated they just laughed at the Feds and bored straight back into their customers with what is now the worlds highest charges.My point of re-regularization ( and that is different to nationalization which I do not agree with) should bring them back to reality.

[JDNSW]

and the ressources are finite - once they are gone they are gone and so will the miners and the jobs. All the profits will be overseas because the companies are owned o/s e.g. China.

Can't see any issue in bringing it into line with the petroleum extraction part of the rersources sector.

Completely wrong on all counts.

1. Resources are finite - but not in practical terms. Mining has been the backbone of Australia for 150 years and will continue to be into the future, for hundreds if not thousands of years. As resources become scarcer, mining of lower grade, deeper and smaller resources will become feasible, as will exploration for these. The number of jobs will increase, not decrease.

2. The miners are not owned overseas - the biggest miner, BHP, is 60% Australian owned and is the largest Australian taxpayer already. Most other miners are at least partly Australian owned, and even if 100% overseas owned, most of the income from sales of product is expended in Australia, profit being only a small proportion of income.

3. Resource rent tax only applies in the offshore petroleum industry. Apart from any other considerations, this new tax is a major grab onto state and territory tax areas, softened by allowing royalties as a deduction.

4. The major fault with the tax is that it ignores the concept of risk, central to the mining industry, and as a result will greatly reduce the future level of mining activity in Australia. Canadian government spokesmen are already crowing over the advantage this will give Canada, but the same applies to other major mineral producing countries such as Brazil, South Africa and Chile.

John

[Captain_Rightfoot]

Thanks for that answer Capt. but are not you and I saying the same thing?
.

Yep, I was just expanding on what you said, and generally having a rant! :D

[JDNSW]

I guess that this fellow know a bit more than many of us about mining and profits :)
'Hysterical' mining industry claims 'complete rot' (http://www.abc.net.au/news/stories/2010/05/07/2893468.htm'section=justin)


In the way that I see is: how many people will be affected by the 40% tax and how many millons in generations to come wiil be better of in the future with the superanuation.
"Think today to be able to live tomorrow"
Whay I do not like about mining in the present form is that they milk dry Australian assets and then they take off and live the future generations with a big hole in the ground....nothing more. :(
Stop selling the raw material and export value added good.

The mining companies are certainly putting a slanted view - but so is the government, and so are you - for example, the government shows a tax which compares the increase in mining profits compared to the government tax in royalties - ignoring the fact that mining companies are among the largest company tax payers in the country. Unlike many other overseas companies, they cannot in general move their tax liabilities to the lowest taxing country by transfer pricing etc.

By putting the super profits tax and the increased superannuation levy into the same announcement, the government has implied that the new tax is somehow linked to improved superannuation. It is not. The increase in superannuation is entirely paid for by employers, and will be a severe blow to the roughly half of small businesses that are not companies, and hence will not benefit from the lower company tax rate.

I am one of those people directly affected by this new tax - as a self funded retiree, I rely on shares to a significant extent, and this plan has already cost me thousands of dollars in value wiped off shares. The same probably applies to anybody who has superannuation, as a significant part of that is almost certainly invested in major Australian mining stocks.

John

[rockyroad]

When Mr Rudd needs money in a hurry he comes up with a new tax and targets an industry. The only difference between alco pops tax and this one is the amount of money collected and maybe an actual goal of what the money will be spent on.

Back to the original point on taxing banks and fuel companies cause they deserve it more, you bet they deserve it. The problem with taxing banks and fuel companies is that any raises in taxes that they cop are immediately passed onto the consumer. The mining companies cant do that to us at least, they could try passing the cost on to China (good luck with that).

One only needs to visit central QLD to see how many mines are in development, one small mining town alone has about 5 mines in development on top of the 5 or so already operating.

Unlike the state and federal Gments mining companies do put money back into the communites, they could probly invest more but so could the governments that are responsible for it.

[Lotz-A-Landies]

I am afraid Diana, that like the federal government, you do not know how mining works.

Exploration staff propose a project, based on available knowledge. Before this project proceeds to the next stage, estimates or calculations are made of the costs and the income expected. This "profit" is then discounted to account for the time expected between the expenditure and the profit (this discounting is very sensitive to predicted interest rates!) and then (this is the important part) factored for the risk in the project.

This procedure is repeated at each stage - <snip>

Now because exploration is not an exact science, and because miners have no control over product prices, and other factors, only some of the projects will make the estimated profit (this is the risk factor). Others will lose money, in some cases, a lot (see for example the BHP WA nickel project). It is necessary for the successful ones to be very successful to make up for the ones that fail. <snip>

The government is now proposing to take a large proportion of this "super profit". This raises the bar for projects to proceed even from the very first step. Only projects which are calculated to be "super super profitable" (before tax) can now proceed to even the first step. Actually it is even worse than that. One of the risks taken into account is what is referred to as "sovereign risk", the risk that the government will change the rules. <snip>

The inevitable result will be a reduction in exploration, development and expansion of mining in Australia, similar to that seen in offshore petroleum with the introduction of the offshore resource rent tax. <snip>

As a final comment, it should be noted that the biggest payer of company tax in Australia is BHP. <snip>

JohnJohn

I admit that I don't know as much as you about the intricacies of mining and as I put at the begining In Big Red Letters it was only my humble opinion. Furthermore, if I can understand the steps or processes in mining, I can also make a comparison with a biotech company bringing a new pharmaceutical to market. I neither need to be a geologist or a biochemist to understand either.

But answer me this: if someone invents or designs something that they want to take to market, how is their risk so significantly different (other than orders of magnitude) to mining company risk? There is the unfunded risk making the invention, the unfunded risk designing how the invention will be made, there is the unfunded risk in the acquisition of property, machinery to manufacture the invention and to start to employ people in the factory, there is risk in finding a market and setting up a distribution system, there is possibly unforeseeable risk (liability) in the product itself being dangerous in unintended uses, and there is risk in that someone else makes a similar invention that gets to the market quicker, cheaper or works better and finally there are risks that there was no market for the product anyway.

Mining not an "exact science", other than commodities like food and grain, what new product is an exact science? e.g. what about the risks biotech or pharmaceutical companies take bringing new products to market?

Absolutely adding a super-tax will raise the bar, but why should it be different to offshore drilling. The Australian people own the minerals sitting under the ground that the mining companies make their profits off and if they don't mine it now they will mine it in our grandchildren's or great grandchildren's lifetime. So why after all the costs and taxes are removed and the company had 6% profit shouldn't we ask for a little more for our resources. Perhaps 40% super-tax is the problem and maybe it should be a little less percentage wise but fundamentally it's not an unjust tax.

When you talk about BHP being the biggest payer of tax, you forgot to mention that BHP has the most mines and takes the most resources out of Australia to make it's profits. More than that you forgot the mention the Biliton part that is not Australian owned or that most of the other larger public listed mining companies are significantly foreign owned.

[Chucaro]

When Mr Rudd needs money in a hurry he comes up with a new tax and targets an industry. The only difference between alco pops tax and this one is the amount of money collected and maybe an actual goal of what the money will be spent on.

Back to the original point on taxing banks and fuel companies cause they deserve it more, you bet they deserve it. The problem with taxing banks and fuel companies is that any raises in taxes that they cop are immediately passed onto the consumer. The mining companies cant do that to us at least, they could try passing the cost on to China (good luck with that).

One only needs to visit central QLD to see how many mines are in development, one small mining town alone has about 5 mines in development on top of the 5 or so already operating.

Unlike the state and federal Gments mining companies do put money back into the communites, they could probly invest more but so could the governments that are responsible for it.

Only need to see the kids in the Hunter Valley schools with repiratory diseases, the increase of brain tumors, the local Doctors in the area leaving the districts because their own kids are sik.
Just wonder if the water table in the region is pure and healty for the Central Coast population :angel:
I rather be poor but my kids healthy.
What many miners are doing here in Oz it is the same that the other greed companies are doing in Brazil. :(

[PAT303]

I worked in the Singleton mines for 8 years and I'm amazed now at the destruction of very good farming land that fed the region for decades and they are now targeting the Coolah-Manilla basin which is unbelieveable.I'm for profits and jobs but destroying the food bowl,and don't believe for a second that it's re-abilitated afterwoulds,once the miners have been there it's forever worthless but we have to start thinking about long term issue's not just our back pockets. Pat

[JDNSW]

John
.......

But answer me this: if someone invents or designs something that they want to take to market, how is their risk so significantly different (other than orders of magnitude) to mining company risk?......
........
Absolutely adding a super-tax will raise the bar, but why should it be different to offshore drilling. The Australian people own the minerals sitting under the ground that the mining companies make their profits off and if they don't mine it now they will mine it in our grandchildren's or great grandchildren's lifetime. So why after all the costs and taxes are removed and the company had 6% profit shouldn't we ask for a little more for our resources. Perhaps 40% super-tax is the problem and maybe it should be a little less percentage wise but fundamentally it's not an unjust tax.

When you talk about BHP being the biggest payer of tax, you forgot to mention that BHP has the most mines and takes the most resources out of Australia to make it's profits. More than that you forgot the mention the Biliton part that is not Australian owned or that most of the other larger public listed mining companies are significantly foreign owned.


Taking the last point first - BHP-Billiton is one company. It is 60% Australian owned - compare for example with the Australian car industry, heavily subsidised by the Australian taxpayer, which is 100% foreign owned, and by transfer pricing minimises its Australian tax liability.

Ausralia owns the minerals sitting in the ground - but the mining companies convert these minerals into saleable product by first of all finding them, and then investing in development of them, paying for the privelige at every step of the way. Without the mining companies the minerals in the ground are worthless.

Why should it be different from offshore oil? For two reasons. The first is that the federal government has jurisdiction over these areas. Onshore, the states set royalites and other conditions calculated to maximise the return to the state. This tax represents a way for the commonwealth to step in and take part of the state revenues without having to change the constitution. To keep projects going as planned, the states would have to reduce their royalties - they are unlikely to do this, so the long term will be lowered state income as projects ramp down to a lower level than would have been the case. The other reason is that one bad idea is not justification for another one. The resource rent tax has long been the source of reduced exploration and development in the offshore - why do you think it is that BHP, for example, has developments in offshore oil in the North Sea and USA?

And in answer to your question about what is different in other risk taking activities? The answer is - nothing, except perhaps the size of the risk. So why is this new tax only applying to mining?

The basic problem is that taxing super profits in risky undertakings makes it not worth taking the risk. Consider for example, what would the result be if the government decided to apply even ordinary company tax to lottery winnings? I predict a dramatic fall in ticket sales, and another transfer of funds from state to federal government.

John

[PhilipA]

I have a contradictory position on this.
First as a self funded retiree , I have invested in Blue chips including BHP so now have lost a motza. Maybe it will come back when all the details are known.

However having studied Economics many years ago, I learned of an economic term called an "Enclave Economy" where one sector ( usually for export) is particularly successful and drags up the exchange rate, draws scarce labour resources form all other sectors etc.

This makes the rest of economy less competitive as it has to fight imports that are relatively cheaper than they should be often by a BIG margin, and bids up labour costs. An indication of teh disparity is the $700K or so minmum cost of a house in Kununurra

So part of the reason our textile industry has disappeared, our car industry is disappearing is because of import competition which has been intensified because of mining exports.

A way to slow down the process is to impose a Resources Rent Tax, or a tax on exports ( royalty) . Trouble is that the royalties were imposed many years ago at a fixed rate and not sliding and the states have been slow to immovable on changing them to reflect the new realities.

So economically I think it is a good thing but like St Augustine would have liked it before I bought BHP shares.

Oh Lord, give me chastity, but do not give it yet.
Saint Augustine

Regard sPhilip A

[Disco44]

I worked in the Singleton mines for 8 years and I'm amazed now at the destruction of very good farming land that fed the region for decades and they are now targeting the Coolah-Manilla basin which is unbelieveable.I'm for profits and jobs but destroying the food bowl,and don't believe for a second that it's re-abilitated afterwoulds,once the miners have been there it's forever worthless but we have to start thinking about long term issue's not just our back pockets. Pat

The same is happening here in Queensland on the Darlings Downs.More fertile arable land could not be found anywhere else in Australia.The main point too is that the land after mining (open cut ) is not the same as it was before."To mine or not to mine" that is the question.

[JDNSW]

I have a contradictory position on this.
First as a self funded retiree , I have invested in Blue chips including BHP so now have lost a motza. Maybe it will come back when all the details are known.

However having studied Economics many years ago, I learned of an economic term called an "Enclave Economy" where one sector ( usually for export) is particularly successful and drags up the exchange rate, draws scarce labour resources form all other sectors etc.

This makes the rest of economy less competitive as it has to fight imports that are relatively cheaper than they should be often by a BIG margin, and bids up labour costs. An indication of the disparity is the $700K or so minmum cost of a house in Kununurra

So part of the reason our textile industry has disappeared, our car industry is disappearing is because of import competition which has been intensified because of mining exports.

A way to slow down the process is to impose a Resources Rent Tax, or a tax on exports ( royalty) . Trouble is that the royalties were imposed many years ago at a fixed rate and not sliding and the states have been slow to immovable on changing them to reflect the new realities.

So economically I think it is a good thing but like St Augustine would have liked it before I bought BHP shares.

Oh Lord, give me chastity, but do not give it yet.
Saint Augustine

Regard sPhilip A


But the other side of the high exchange rate is that most consumer goods are much cheaper. Sure, slow down the mining boom, lower the exchange rate, higher prices for everything, increasing unemployment and lower wage increases as miners stop competing for workers, increase taxes on everything to make up for the reduction in tax revenues as the boom slows. Sounds like a real vote winner to me!

John

(The other driver of high exchange rates is Australia's high interest rate regime. This is in place because governments are reluctant to use any other tools (such as fiscal measures) to control inflation, as the adverse effects of these can be slated directly home to them.)

[JDNSW]

I worked in the Singleton mines for 8 years and I'm amazed now at the destruction of very good farming land that fed the region for decades and they are now targeting the Coolah-Manilla basin which is unbelieveable.I'm for profits and jobs but destroying the food bowl,and don't believe for a second that it's re-abilitated afterwoulds,once the miners have been there it's forever worthless but we have to start thinking about long term issue's not just our back pockets. Pat

This is happening simply because mining can be far more profitable than farming - for at least fifty years Australia has been reducing the viability of farming in every way possible, from land use restrictions to unrestrained imports to an impossible maze of red tape.

The fact is, however, that very little of Australia's mining has impacted on cropland - urban expansion has almost certainly had a far bigger effect. The impact of mining on towndwellers is largely limited to those towns and cities which are dependent on the mining for their existence, or at least prosperity.

Having made these points however, I would also point out that the biggest impact Australia could have on global carbon emissions would be to phase out most coal mining rather than increasing mining - Newcastle has just opened another coal loader I believe. Far more effective than an ETS. This would be technically possible, but would require a major drop in living standards for all Australians. Can you visualise any government doing it?

John

[Disco44]

But the other side of the high exchange rate is that most consumer goods are much cheaper. Sure, slow down the mining boom, lower the exchange rate, higher prices for everything, increasing unemployment and lower wage increases as miners stop competing for workers, increase taxes on everything to make up for the reduction in tax revenues as the boom slows. Sounds like a real vote winner to me!

John

(The other driver of high exchange rates is Australia's high interest rate regime. This is in place because governments are reluctant to use any other tools (such as fiscal measures) to control inflation, as the adverse effects of these can be slated directly home to them.)

and now back to my rant about Australian banks. It is all tied in.
John.

[Bigbjorn]

I believe that the natural resources of this country are the property of the Australain people. Any who wish to exploit these resources must be made to pay a fair price. Up until now they have not.

[Lotz-A-Landies]

<snip>
And in answer to your question about what is different in other risk taking activities? The answer is - nothing, except perhaps the size of the risk. So why is this new tax only applying to mining?

The basic problem is that taxing super profits in risky undertakings makes it not worth taking the risk. Consider for example, what would the result be if the government decided to apply even ordinary company tax to lottery winnings? I predict a dramatic fall in ticket sales, and another transfer of funds from state to federal government.

JohnJohn

I think you are missing my point here, manufacturers or commodity producers do not get their raw materials for free, the producer has to buy the land and buy the seed, and pay for water allocations if they irrigate, the manufacturer has to pay for their raw materials (often from mining companies), the mining industry only pays a small proportion of their output in royalties for their raw materials. If they don't make a profit or only make 6% or less profit they don't pay the resources rent tax on top.

I would love to get 6% on my bank interest, even on my share portfolio but I rarely if ever do.

On lotteries, the tax is already paid before the prize is calculated, so the tax is inherent.

[Legion]

Ausralia owns the minerals sitting in the ground - but the mining companies convert these minerals into saleable product by first of all finding them, and then investing in development of them, paying for the privelige at every step of the way. Without the mining companies the minerals in the ground are worthless.

No they are not worthless. The question is how much is the govt going to charge for its ore?

I don't really see why compensating the owner of the ore is a difficult concept.

How you do it is a different question.

Andrew

[Legion]

When the crash hit our banks were insolvent. They were unable to rollover their funding. Aussie banks get nearly half of their funds from OS. This debt is relatively short term, which means it is constantly being rolled over.

So, after a few phone calls the government guaranteed our banks. This enabled them to get capital and go on one of the biggest lending sprees in our history (I suspect it was an unofficial condition) encouraging poor saps into property to stabilise the housing and construction markets.

Thing is, as credit markets stabilised the banks didn't need the guarantee they just took it off the table and said "if you need it again it's there" - nudge nudge, wink wink. So, the banks now know they can't get into trouble so they are having a good old time doing whatever makes them profits and their CEO's bonuses.

They haven't built up their reserves or addressed their funding issues in any meaningful sense. So, should there be another seizure of the credit markets, or a deterioration in the property market {gasp} then the tax payer will be on the hook. Given we have over one trillion in mortgage debt alone it wouldn't take much for our government to be saddled with substantial debt. Yet this is not mentioned.

Oh yeah, the mining tax is a real stupid idea too. Endless growth in China is just taken as a given. Already there are signs that their crash is a happening. I see our mining and banking industries as increasingly vulnerable. In short, those are some dark clouds forming...

1) Australian banks were not insolvent.
2) They were able to role their funding. Australian banks have excellent risk ratings. Better than some countries :). The Australian and USA banking industries are very different beasts.
3) The Govt never guaranteed the banks outright. The Govt guaranteed the deposits of small deposit holders, non-profit, trusts etc. The govt didn't guarantee the banks lending as you state. If banks make bad lending decisions they wear it - ( or they pass it onto their customers) but that in itself is not a govt obligation.
4) The banks didn't try to stabilize anyone's industry by encouraging anyone. Low interest rates may have lead some into the property market however from the banks perspective they were extremely risk adverse. Lending was extremely tight.
5) The bulk of the hoohar you saw in the media was kevin.

[JDNSW]

I believe that the natural resources of this country are the property of the Australain people. Any who wish to exploit these resources must be made to pay a fair price. Up until now they have not.


This is entirely up to the relevant state government - they can increase royalties any time they want to, and bear the loss of mining investment. Of course, if someone has put millions into developing a mine on the basis of x% royalties, and then this is increased, it is not unreasonable to expect them to get a bit annoyed.

Can you suggest any way of determining what is a fair price? And why you do not think the price being paid is fair? Before you answer you might consider that a large proportion of the people who have invested in mining companies in Australia over the last 150 years have lost all their money!

John

[JDNSW]

John

I think you are missing my point here, manufacturers or commodity producers do not get their raw materials for free, the producer has to buy the land and buy the seed, and pay for water allocations if they irrigate, the manufacturer has to pay for their raw materials (often from mining companies), the mining industry only pays a small proportion of their output in royalties for their raw materials. If they don't make a profit or only make 6% or less profit they don't pay the resources rent tax on top.

I would love to get 6% on my bank interest, even on my share portfolio but I rarely if ever do.

On lotteries, the tax is already paid before the prize is calculated, so the tax is inherent.

Mining companies do not get their raw materials free either. They have to spend often very large sums on exploration (most of which can never be attributed to a specific project), pay through the nose for an exploration permit, pay for a mining lease, pay surface owners for access, pay for water, pay for fuel, pay for transport, etc. etc. They only pay a small proportion of their output in royalties for the simple reason that the major part of the output goes into paying capital and operating costs, and for many mines the royalties represent a very substantial part of the real profit. And many mines never produce a significant profit, operating from day to day on the brink of financial disaster.

But you completely miss MY point. So-called "super profits" are necessary in mining simply because a large proportion of expenditure results in no profit at all. The comparison to bank interest or the long term bond rate is completely spurious. So is the comparison to your share portfolio - what this tax is doing is the equivalent of taxing at a higher rate any of your shares that do better than 6% - not as a portfolio, but individual shares. The net result is likely to be that your portfolio does well under the benchmark after tax. And remember that it is not as easy to change mines when they are doing badly as it is to change shares, so companies tend to hold onto losing operations in the hope of a turnaround, to at least reduce losses.

And it is worth noting that most industries would regard a profit of only the long term bond rate as being far below expectation - a good example is Telstra's insistence on 18% average. How about a super profits tax on them or the banks?

John

[mns488]

Rudd has in a few strokes of his pen taken Australia back 10 years

It is unfathomable that he and his cronies could be so short sighted, and drop a huge dose of uncertainty into the Australian investment landscape. Uncertainty leads to fear and fear leads to avoidance. Especially given what is happenign in the O/S markets!

The scariest part about all this is that Rudd's policy aims at relying on the resource sector to help fund the future hospital system. This is in a way throwing all your eggs into the one basket. Resources, like all other sectors, have highs and lows. God help whoever is left with this reliance when the resource sector moves into a low cycle.

Policy on the go with ruddy.


-----
Super-profit tax to boost Canada's competitive advantage, says Jim Flaherty.

Monica Gutschi From: Dow Jones Newswires May 05, 2010 10:50AM

AUSTRALIA'S proposed new tax on its resources industry could be a huge competitive advantage for Canada, according to that country's finance minister, Jim Flaherty.

Speaking to the media ahead of a speech to a public-policy forum on pension reform, Mr Flaherty said overnight that the continued decline in corporate taxes in Canada was a "great attraction for investment".

Mr Flaherty said he still needed to closely review the tax proposed by Australia's government to fully understand how it worked. Like Australia, Canada has a very large and active resource industry.

Kevin Rudd's Labor government announced plans to make mining giants liable for a tax on profits made from the exploitation of non-renewable resources. The extra revenue will be used to lower other corporate taxes.

Mr Flaherty noted that Canada had been reducing its corporate tax rate, and corporations in most of Canada would face a combined 25 per cent tax rate by 2012.

He said the "easiest thing" for a politician to do is raise taxes, which immediately increases revenues, but limits growth.

[mns488]

Furthermore,

"Kevin Rudd's Labor government announced plans to make mining giants liable for a tax on profits made from the exploitation of non-renewable resources. The extra revenue will be used to lower other corporate taxes"

Why should the banks escape the super tax, they have been exploiting Australians for years...

[Chucaro]

It does not matter if it is Kevin Rudd's Labor government who put this tax, you can be 100% sure that if the Libs win in the future they will not remove the tax.
This is how things worked in Australia for many years.
Any noise that a politician make now is for their gain in the future, for sure when their political life ends they will be seating in the board of a big company or corporation. :mad:

I would love to see a politician prod of their country and look after their people and not the rich :mad:

Any negative rumor now by the "Experts" will benefit the rich and few purchasing cheap shares and then sell them in few months time at high price.

The issue here is who it is going to benefit from the Australian resources, the 95% + of the population a a buchn of rich people that do not care less about the Australians, their health or the country future.

IMO I do not like to see more Hunter Valleys in Oz and if we have to use of resources stop exporting the raw material now.

Time for coffee now ;)

[mns488]

It does not matter if it is Kevin Rudd's Labor government who put this tax, you can be 100% sure that if the Libs win in the future they will not remove the tax.
;)

If I was 100% sure about anything it would be that the Libs would NOT support this and i believe they don't (just can't find a link).... LOL.

[Chucaro]

If I was 100% sure about anything it would be that the Libs would NOT support this and i believe they don't (just can't find a link).... LOL.

That it is what I am trying to say, they do not support this today, they look good with their future employers and after if in goverment they will not remove the tax because......any excuse.;)

Just have a look how many ex politician from both parties are seating now or have a seating before in big company directors rooms ;)

[Chucaro]

This is interesting

The Australian Government is following the Henry review recommendation relating to the profits-based tax.

The Liberals complain that the Government is not implementing the recommendations if full.

The Minerals council itself has made a submission to the independent tax inquiry suggesting the resources tax be replaced with a profits-based tax.

HERE (http://www.theage.com.au/business/big-miners-cry-foul-but-this-is-what-they-asked-for-20100505-uat2.html) is a good reading about it.

[ramblingboy42]

australias leading banks have between them just released their profit figures of approx 100billion dollars
australias major mining companies have also released similar figures
there are also many smaller banks and mining corparations whose figures we dont see because their profits are only hundreds of millions......this is because media cant sensationalise them as easily
however it is rather crude to announce figures like these and then cry when the govt asks them to put their hands a little deeper into their pockets and give a little bit more back to the country that theyre raping in one form or another

[Disco44]

australias leading banks have between them just released their profit figures of approx 100billion dollars
australias major mining companies have also released similar figures
there are also many smaller banks and mining corparations whose figures we dont see because their profits are only hundreds of millions......this is because media cant sensationalise them as easily
however it is rather crude to announce figures like these and then cry when the govt asks them to put their hands a little deeper into their pockets and give a little bit more back to the country that theyre raping in one form or another

Hear hear Mate I back that to the hilt!!!Now all we need is a Government with the guts to do it..and that's from both sides of the political spectrum.Dreaming,I think, they all have a big yellow streak.

[Hymie]

I don't understand how Taxing our way to prosperity is a good thing, Winston Churchill was dead against it.
To me it's the same as Fighting for Peace or trying to get your Virginty back through screwing.
Seems to me the Goverment just rented Avatar on video and decided that Miners are bad, naughty planet rapers.

[LandyAndy]

Yep... they dont realise how much perth needs the mining giants... it runs the state!


Dorko


Try
RUNS THE COUNTRY!!!!!
Andrew

[Chucaro]

I cannot understand why everybody blame the goverment when the interested parties asked for an independent tax inquiry and submited on it the suggestion of this tax.
I am not labor supporter but we have to be fair, the Libs asked to implement the recomendations in FULL and the Miners Council asked for them.
Please read what it is going on and you will see that all of them manipulate the rest of the population. :(

[Bigbjorn]

Many commentators seem to be missing the point. The proposed tax is a tax on large profits being made by a certain economic sector. Profits taken from the exploitation of OUR resources. Yes, OURS. You and I, the citizens of Australia own these resources and should be paid a fair return for the exploitation of them.

Greed is endemic in the private sector. If one company will pass on a project because of the tax, another won't.

90% of the "mining companies" in Australia don't own a pick and shovel, let alone a wheelbarrow. They are minimally capitalised opportunists whose only asset is a brass plate on a lawyer's office in Sydney or Melbourne. Their prospecti mention, "farm ins", "joint ventures", " authority to prospect", "expression of interest". They don't actually do anything but hope someone else will and they can get an earn out of it. If publicly listed, they are among the penny dreadfuls. The mining boards on our stock exchanges are a bit like a day at the races looking for the touts and urgers. I learnt this selling mining equipment.

[mns488]

Many commentators seem to be missing the point. The proposed tax is a tax on large profits being made by a certain economic sector. Profits taken from the exploitation of OUR resources. Yes, OURS. You and I, the citizens of Australia own these resources and should be paid a fair return for the exploitation of them.

Greed is endemic in the private sector. If one company will pass on a project because of the tax, another won't.

90% of the "mining companies" in Australia don't own a pick and shovel, let alone a wheelbarrow. They are minimally capitalised opportunists whose only asset is a brass plate on a lawyer's office in Sydney or Melbourne. Their prospecti mention, "farm ins", "joint ventures", " authority to prospect", "expression of interest". They don't actually do anything but hope someone else will and they can get an earn out of it. If publicly listed, they are among the penny dreadfuls. The mining boards on our stock exchanges are a bit like a day at the races looking for the touts and urgers. I learnt this selling mining equipment.

Why single that industry. What about banks that have been exploiting our other resource, our people?

[JDNSW]

Many commentators seem to be missing the point. The proposed tax is a tax on large profits being made by a certain economic sector. Profits taken from the exploitation of OUR resources. Yes, OURS. You and I, the citizens of Australia own these resources and should be paid a fair return for the exploitation of them.

Greed is endemic in the private sector. If one company will pass on a project because of the tax, another won't.

90% of the "mining companies" in Australia don't own a pick and shovel, let alone a wheelbarrow. They are minimally capitalised opportunists whose only asset is a brass plate on a lawyer's office in Sydney or Melbourne. Their prospecti mention, "farm ins", "joint ventures", " authority to prospect", "expression of interest". They don't actually do anything but hope someone else will and they can get an earn out of it. If publicly listed, they are among the penny dreadfuls. The mining boards on our stock exchanges are a bit like a day at the races looking for the touts and urgers. I learnt this selling mining equipment.

Not quite. The proposed tax is on large profits on specific projects, not by an economic sector. The tax takes no account of the overall and long term profitability of the sector as a whole, but seeks to cream off the profits from the best projects only. Long term, this will mean that the only projects to proceed will be the ones that are least risky - these are also the ones that are not likely to give very large profits - thus the tax will dry up after a decade or so, and along with it not only the very profitable few projects, but the other less successful ones that were also very risky.

And yes, the profits come from the exploitation of "our" resources, as with any economic activity. But these resources, until discovered and mined, are of no value to "us" or anybody else.

And you are right - 90% of Australia's mining companies don't own a pick and shovel - but what they do is raise money and take risks that nobody else is prepared to take by undertaking risky exploration - and that money largely goes ultimately in paying mostly Australian contractors of various types. But they will only do so if the potential reward is commensurate with the risk - and what this tax is saying is "it does not matter what the risk you undertook is, you should only get a return equal to the long term bond rate".

John

[Disco44]

Try
RUNS THE COUNTRY!!!!!
Andrew

This has been discussed before many times on this forum.WA puts a certain % in most other states do likewise...(Wait Awhile) far from runs the country Amen!

[land864]

Read Laurie Oakes article in today's Herald Fun.

Same thing happened approx 30m years ago with the oil comps. They got over it

[3toes]

Some seem to be missing the underlying point here in regard to the 'super tax'. This is simply a back to basics Labour tax grab on industry. The reality is that the rust belt states continue to under perform and need ever more funds to make up for the poor management seen over the last couple of decades during which none of their state governments despite significant federal subsidies have been able to resurect their dying industries or create new industry bases. So they are taking the funds off the more successful states through taxation to keep them these state governments and populations afloat. With the large imbalance in population sizes these states have more say in federal politics and hence pull on the purse strings.

Also the mining industry is scared as the UK government has been threatening a similar tax for a couple of years. They have managed to fight this off each time by promising to increase the taxable income allocated to the UK. I worked for a mining company and we used to have annual discussions with various governments and agree how much tax they wanted and we would pay. Amazing / scary to see in action. With a massive multi billion pound gap between tax take and spend promises hang over from the election plus a debt high level of debt making further borrowing difficult think such a tax will be too tempting and difficult to dodge this time. If this happens both BHP and Rio Tinto while Australian have a dual London listing and do doubt they and share holders will be worried they will be caught twice.

[JDNSW]

Read Laurie Oakes article in today's Herald Fun.

Same thing happened approx 30m years ago with the oil comps. They got over it

Exactly - and set up offices in places like Houston, London, Dubai, Singapore, downscaled or shut their Australian offices, and in many cases merged with overseas companies. Got me a lot of frequent flyer points! Unlike Laurie Oakes, I was actually involved.

Unfortunately for the best long term results, this sort of envy based special tax is just about inevitable in any society. The people who are not prepared to take risks are always envious of those who were prepared to take risks if they beat the odds and succeed big time. But just because it is inevitable does not make it equitable or good policy.

John

[Captain_Rightfoot]

I'm terribly sorry to break all this to you...


1) Australian banks were not insolvent.
Yes they were. They couldn't roll their funding over and the banks needed money quickly. They were insolvent, and a run of depositors was starting too.


2) They were able to role their funding. Australian banks have excellent risk ratings. Better than some countries :). The Australian and USA banking industries are very different beasts.

Sorry mate, the government guaranteed deposits, but it also lent them the AAA government credit rating. For funds they used this for they paid the government a small percentage. It effectively made them totally safe for overseas lenders. They stopped using it when the credit spreads dropped, and as I alluded to the government took their guarantee off the table but said it was there if they needed it - therefore adding the moral hazard I described.


3) The Govt never guaranteed the banks outright. The Govt guaranteed the deposits of small deposit holders, non-profit, trusts etc. The govt didn't guarantee the banks lending as you state. If banks make bad lending decisions they wear it - ( or they pass it onto their customers) but that in itself is not a govt obligation.

Well, it guaranteed deposits up to a certain amount, and it gave them their AAA rating so they could roll over funding. Other than nationalising them there wasn't a lot more they could do.



4) The banks didn't try to stabilize anyone's industry by encouraging anyone. Low interest rates may have lead some into the property market however from the banks perspective they were extremely risk adverse. Lending was extremely tight.

Well, that ones going to be hard to prove. However they were lending at LVR's up to and in some case over 100% until later in the year when they started reducing it. A number of economists believe that wherever housing LVR's exceed 70% prices increase exponentially. Those policies worked well with the First Home Owners Grant to stop the decline that had already started and send prices up again. That is good support.


5) The bulk of the hoohar you saw in the media was kevin.

Don't really know about that.

As it turns out it's happening again. Australia has some of the worst performing banks in terms of risk in the world at the moment. It seems that the world doesn't share your optimism about our banks.

Default fears soar for Australian financials. (http://www.businessinsider.com/default-fears-soar-for-australian-financials-2010-5)

[Disco44]

In today's Papers

University of Canberra study reveals banks' GFC con
NICK GARDNER From: Sunday Mail (SA) May 08, 2010 10:42pm

BIG banks have used the global financial crisis as an excuse to gouge an extra $733 a year from the average customer, while boosting paypackets for staff and posting record profits for shareholders.

A University of Canberra study has found that banks are overcharging customers through bigger profits on mortgages, higher fees and lower savings rates compared to before the GFC.

In the same week that Westpac announced half-year profits up more than 30 per cent to almost $3 billion, the study says official industry statistics prove banks have been lying about their financial health to the public.

"They (big banks) have been crying poor throughout the global financial crisis and yet official data shows that they have been misleading, to put it mildly" said Milind Sathye, professor of banking and finance at the university.

The university has used statistics from the Australian Prudential Regulatory Authority (APRA) to monitor the banks' financial health.



"This means our conclusions can be openly scrutinised" said Professor Sathye.

"The banks, on the other hand, make their arguments based on data that only they can see. And on that basis, they can argue almost anything" he said.

The most recent APRA data shows the banks far from cutting back during the crisis, remuneration for bank management and staff actually rose from $14 billion a year to $16 billion a year - a healthy 14.2 per cent increase - all while millions of ordinary workers were suffering pay freezes or reduced hours.

Banks have also slashed the rates they pay to savers, sometimes by almost half.

[Chucaro]

Disco 44, the problem is that if the Goverment in charge (Labor or lib) do something about it like the actual goverment is doing now with the miners base on an independant enquire the people will star bashing the them because :mad:
People like win win suituation like it is happens now with the 40% tax. :mad:
As long there is greed we do not have a hope :(

[abaddonxi]

Oh, I thought you said tax the minors.

Bugger, I'm all for that.

[vnx205]

Oh, I thought you said tax the minors.

Bugger, I'm all for that.

:D:D

At the risk of introducing another note of levity in a serious discussion, I thought I would mention another use of that homophone.

At the big gathering at Blinman a few years ago on the long weekend in October, there was a team in the 'Cook Outback" camp oven cooking competition that used the same play on words as their team name.

Teams not only had to have names, but they all seemed to dress up as well. There was a team where the members were all dressed as Frenchmen in striped T shirts and with berets and fake moustaches (even the women).

Another team were mostly children and were dressed in overalls with miner's hard hats complete with lamps. As you may have guessed by now, they called themselves "The Mini Minors" or "The Mini Miners". I forget how they spelled it but I thought it was quite witty. :D

[olbod]

Also, have heard rumors that they are thinking about re-introducing death duties after the next election ?

[Chucaro]

'racist' mining tax :eek::confused:
Comments like this show how incapable are the politician in Australia (in both parties) :mad:

It is sad that this imbecil is treating as with comtent :mad:

The comments are HERE (http://www.abc.net.au/news/stories/2010/05/10/2894777.htm'section=justin)

Looks like that for this politician selling our assets to people of other countries is OK.
Just try to purchasing real eatete in Japan and you will know how proud are them and how are protecting their land.

[BMKal]

The "super tax" on mining is nothing short of a vote catching exercise aimed squarely at the same people that the "cash handouts" were given to during the GFC - and that is those who are too blind to see past their own short term gain.

Why the mining industry - well pretty obvious really - if Rudd applied a similar tax to banks or the fuel industry as some have suggested, they would simply pass on the cost directly to their customers (you and I) who would be up in arms about the increase to our cost of living. The mining companies do not have this ability.

For those who believe that the "super tax" is being implemented to boost our superannuation - congratulations, you have been duped by Rudd's spin doctors who have achieved their aim by announcing the new tax and an increase to the basic super contribution in the same breath. The fact is though, that the increase in super contribution is to be funded directly by your employer - NOT from any tax on the mining industry.

The Australian mining industry is already the second highest taxed of any in the world - implementation of this ill conceived tax grab will make it by far the highest taxed in the world. Anybody who thinks that investors, wherever they come from, will continue to put their money into an industry where there are options available which offer a higher return, is simply living in lala land.

Other than what is being currently seen on the share market, the effect of this tax will have little effect in the short term. Existing mines are not about to shut down because of it. The real effect is the long term destruction of the industry (and hence, the Australian economy) as future investment dollars move offshore to projects offering a better return. This means that as existing orebodies are depleted, there will be significantly fewer to replace them - meaning less Australian jobs.

As for the comments that the mining industry has previously asked for a tax of this nature, and that the liberal opposition has been critical of the government for not imposing the full list of recommendations in the Henry review - both are true. But you have once again been taken in by Rudd's spin doctors and choose to selectively quote only those small parts of other people's comments as Rudd has done. The mining industry previously asked for a tax of this nature IN PLACE of the myriad of other taxes that it already pays, NOT as an addition over the top. Their aim (as was Ken Henry's) was to simplify the tax structure, and not to add additional layers of tax as a "cash grab" which was designed to boost their disastrous management of the Australian economy, and appeal to the short sighted voter who can't see past what it might mean for him/her personally in the short term.

Fortunately, I don't believe that this new "super tax" will ever see the light of day. It is more likely that one (or more) of the following will happen -

1. Rudd will make another "backflip" when he realizes that this is likely to cost him an election.
2. Rudd will be voted out at the coming election and the replacement government will not implement the tax in its current form.

It is quickly becoming plainly obvious that the majority of Australians are not in favour of this tax - leaving only the short sighted in agreement with it. Personally, I feel that this might just be the straw that breaks the camels back for the Rudd government. This mob has bumbled along from one stuff-up to the next (cash handout vote catching exercise, insulation debacle, disastrous schools projects to name just a few). It is looking more and more like the writing is on the wall for them. While I'm no great fan of the opposition either, at the moment I think that a robber's dog could do no worse than the disastrous rabble in charge at the moment.

JDNSW has the most comprehensive understanding of the industry and the issues surrounding this proposed tax that has been posted on here (and that I have read in many sources). Together with a few other posts in a similar vein, these would make good reading for anyone who really wants to understand the issues, and not just be sucked in by political spin.

And as for those who say "let's leave it in the ground" and stop exporting raw materials - yeah righto - let's all move back to the dark ages. Yes, value adding and selling downstream processed goods and materials is the logical way to go, but the facts are that Australia has never been able to achieve this, and but for a few small scale examples, never will.

I do agree though, that mining (and urban expansion) into areas which have for generations been the "food bowl" of Australia make no sense at all. most mining however, is outside of these areas.

[Bigbjorn]

We only get paid once for our natural resources. Once the stuff is dug up and shipped out there are no more paydays. We need to get a good price. To date we have not.

There should also be a mandatory amount of value adding. Not just dig it up and ship it. We should be doing something with it that will employ the large number of unskilled and semi-skilled people. Manufacturing and processing are the only ways of doing this.

[BMKal]

Yes - we only get paid once for natural resources, but whether we get paid enough or not is a matter of opinion (and market forces). I believe that Australia has done pretty well over all in what we get paid, especially when compared to what many other countries get paid for the same materials.

Yes - value adding is the way to go - in theory. The problem is that the industry required to achieve this on a large scale is hugely expensive, and there is simply not the money available in Australia to invest in this industry, especially when the same can be achieved offshore at a fraction of the cost. It has been tried - and failed - on numerous occasions.

And as for providing work for the unskilled and semi-skilled people - what unskilled and semi-skilled people? There is huge unsatisfied demand for labor in Australia as it is. Unemployment is at almost record lows. Why are companies having to bring in labor on 457 visas and the like already if there is this workforce available?

If there are people who cannot find work because of lack of necessary skills, I would think it better to upskill these people to enable them to fill the vacancies available.

[JDNSW]

We only get paid once for our natural resources. Once the stuff is dug up and shipped out there are no more paydays. We need to get a good price. To date we have not.

There should also be a mandatory amount of value adding. Not just dig it up and ship it. We should be doing something with it that will employ the large number of unskilled and semi-skilled people. Manufacturing and processing are the only ways of doing this.

While this sounds like a good idea, it is a lot easier to state it than to actually do it.

Consider for example the three major export minerals.

Iron Ore. If Australia proposed to export only pig iron instead of iron ore, apart from the question of where the money was going to come from to set up the huge steelworks, the buyers would simply shrug regretfully and buy iron ore at a somewhat higher price from Brazil.

Coal. Most coal exported is used for power generation. How are you going to export power to China and Japan?

Natural Gas. Almost all exported natural gas is used for domestic and industrial purposes and power generation in Japan. How are you going to value add to it, beyond the already expensive liquefaction process?

Some minerals do offer the possibility of increased processing, but these are relatively minor players or can only compete with subsidies such as cheap electricity for alumina.

The price paid for minerals is set by the world market. In general this is what is paid for Australian minerals. If you mean the government take - the mining industry is already among the highest taxed in the world, so I don't quite know what you expect to happen and still keep much of an industry. There are very few if any minerals that can be obtained only from Australia, and the only way Australian minerals can be competitive is if they can be sold cheaper or on better terms than competitors. And the only way mining companies will operate in Australia is if the rewards are commensurate with the risks, and at least as good as alternatives.

Once the fair reward allowed is set at the long term bond rate, as the government proposes, why would anyone go into anything as risky as mining? Just put your money into government bonds. At least in the offshore petroleum industry the allowable profit is 11% not 6% before the resource rent tax cuts in.

Worth noting this quote, actually from an article on the National Broadband network:- "Finance Minister Lindsay Tanner admitted yesterday that a 6 to 7 per cent investment return was not 'in the zone that triggers an ordinary, commercial investment". So the question has to be asked - if according to the government, this sort of rate is not going to get someone to invest in a commercial operation, why would they expect miners to plan a risky mining project on that basis?

John

[Chucaro]

We only get paid once for our natural resources. Once the stuff is dug up and shipped out there are no more paydays. We need to get a good price. To date we have not.

There should also be a mandatory amount of value adding. Not just dig it up and ship it. We should be doing something with it that will employ the large number of unskilled and semi-skilled people. Manufacturing and processing are the only ways of doing this.

I am glad that I can see people that understand the value of our resources.
The problem is that too many people just read what ever "one side" view is posted in our media or the directors of the companies.
There is not need to read what are the opinion of the "experts"just have a look what it is going on in other countries and how proud are them about the assets of their country.
The same thing that it is going on with themines here is what it is going on in Tasmania with the wood chip. Just pure greed and short view of the future.
The idea of this people is just get the money and run! :mad:

[cartm58]

Tax is a cost of doing business same as any other cost if your going to increase the cost of doing business in Australia by 40% than the accountants will simply look for places other than Australia to do business. The world is full of dirt and other places have the same minerals as Australia and cheaper costs of producing that dirt with varying differences in transporting that dirt to market.

So if the total cost of production of dirt is cheaper in Brazil, India, South Africa or anywhere else in the world that is where the money and the mines are going to go.

If Rudd claims the 40% dirt tax will fund superannuation increases he is lying and if he thinks the 40% tax is best way of funding superannuation he is fool as well.

Superannuation should be made tax free for any money going in and for anytime money held in investments and should only be taxed atnormal PAYE rates when you withdraw from your superannuaitona co**** and actually spend the money on goods and services.

Politicians have changed the laws and taxes regarding superannaution nearly every budget in the last 10 years and have totally gone back on the many reforms introduced to encourage people to self contribute to superannuation rather than rely on employer 9% contributions.

Rembering that every dollar you saved into your Superannuaiton is a dollar not required to be given to a pensioner by the Government.

Sooner we lose the Rudd and his band of theives and liars and incompetents the better the country is going to be

[VladTepes]

The "super tax" on mining is nothing short of a vote catching exercise aimed squarely at the same people that the "cash handouts" were given to during the GFC - and that is those who are too blind to see past their own short term gain.

and that is, if history teaches us anything... most voters.

http://inlinethumb54.webshots.com/35765/2301315680100403462S600x600Q85.jpg

[Chenz]

Only need to see the kids in the Hunter Valley schools with repiratory diseases, the increase of brain tumors, the local Doctors in the area leaving the districts because their own kids are sik.
Just wonder if the water table in the region is pure and healty for the Central Coast population :angel:
I rather be poor but my kids healthy.
What many miners are doing here in Oz it is the same that the other greed companies are doing in Brazil. :(

Take the mines out of the Hunter Valley and you will see a lot more illness like alcohol abuse, suicide and the other problems with unemployment.

Rudd is kidding. The banks make obscene amounts of money from other peoples hard earned. At least the miners are producing a product that has got this country out of the stook for the past half a century.

Tax the crap out of the banks and legislate so thay can't just pass it onto Joe Citizen and family.

[mns488]

http://www.smh.com.au/business/the-resource-super-profits-tax--what-is-it-20100511-usnu.html
-------

Let me know if anyone has a view counter to this or debates any of the facts presented. Given the tsunami of rhetoric coming from all sides I thought it was time for a post on the facts.

MYTH:

The "super-profit" tax will tax miners a total of 40% on profits above the 10 year bond rate (5.7%)

FACT:

The marginal tax rate on all miners who make a super-profit is 57%

For example

if revenue = $100 and

Expenses = $50

Your profit = $50

You can then subtract depreciation, with the allowance - set at 6 per cent.

So if RSPT allowance = $3

You are left with $50 - $3 = $47

The $47 is taxed 40 per cent (the super tax).

So $47 x 0.4 = $18.8 and you are left with $ 28 .20

The $28.20 is taxed again at 28 per cent (the company tax).

So $21.20 x 0.28 = $7.90 and you are left with $20.30.

That adds up to about a total tax of about 57 per cent.

MYTH:

The mining tax will be used to fund superannuation increases

FACT:

Whilst the are plenty of government bureaucrats with super to pay, the total annual increment for them is only $250M and all other superannuation is paid by employers (including the mining industry). The cut in the company tax rate is designed to offset this, not the "super-tax"

MYTH:

"this tax is the same as the petroleum resource rent tax and that has caused no issues"

FACT:

It isn't - the PRRT applied only to NEW projects and kicks in only when profits are 5% ABOVE the long-term bond rate. Also the PRRT does not apply to projects that draw state royalties.

MYTH:

"the resources are owned by all Australians"

FACT:

onshore mineral resources are owned by the States, not the Commonwealth

MYTH:

"the super-profits levy was recommended in the Henry review"

FACT:

the Henry review never mentions the term "super-profits" and it recommended a corporate tax rate of 25% and the abolition of all state royalties to allow a resources rent tax. "Super-profits" was first mentioned by Marx is "Das Kapital"

MYTH:

"Miners only pay $1 in every $7 profit in taxes, as opposed to $1 in $3 ten years ago"

FACT:

Rudd conveniently left $80 billion dollars in corporate tax revenue off his figures. In fact, tax revenue from mining has grown 10 fold from $2.6 billion to $21.9 billion over the last 10 years. State royalties vary, but miners currently pay an average of $4 in taxes for every $10 profit they make.

[Lotz-A-Landies]

Thanks for that summary, It's good to find out that the total including "supertax" is 57% not the hysterical 70% tax one mining magnate was spruking!

[JDNSW]

Thanks for that summary, It's good to find out that the total including "supertax" is 57% not the hysterical 70% tax one mining magnate was spruking!

Typical confusion of adding percentages of different quantities - the percentages don't add, the quantities do. Innumerate I would think rather than hysterical.

But the tax rate of 57% compared to a tax rate of 28% on, for example, banks' super profits shows exactly what the miners are upset about.

John

[Tombie]

Value adding? We mine ore, turn it into pellets as well as raw ore.
Here are the load out conveyor and bins full of export pellets.

[Chucaro]

Take the mines out of the Hunter Valley and you will see a lot more illness like alcohol abuse, suicide and the other problems with unemployment.

Rudd is kidding. The banks make obscene amounts of money from other peoples hard earned. At least the miners are producing a product that has got this country out of the stook for the past half a century.

Tax the crap out of the banks and legislate so thay can't just pass it onto Joe Citizen and family.

OH! great let kill the next generation with cancer before thet become addictive to alcohol, and forget to be a bit cretive and create alternative employment.
It is sad.....really sad :(

[Chucaro]

Value adding? We mine ore, turn it into pellets as well as raw ore.
Here are the load out conveyor and bins full of export pellets.
Tombie, when I come to Australia in 1969 in Port Kembla alone were more then 1200 tradesman working on new projects inside the place plus all the other subcontracting work.
I was able to drive in the Botany/Mascot district alone on sundays and get more than 10 oprions of tradesman jobs to apply next day.
We killed our manufacture base, the skill labor and other good things in this country swapping them for warehouses, and forklifts :(
I do not know if we have to put the balme 100% in globalization but I think that our politician (in both paties) are to balme in a big way.
I remember when Ford closed down the assembly plant in Lidcombe because the wages were too high.
What a lot of crap, back then In japan the workers assembly the Mazda wich compete with the Capri were earning $ 80000 a year.
If our gioverments were proud of their country like the japs are we will have all the industry here.