Thread: 40% Tax

Originally Posted by Chucaro

I guess that this fellow know a bit more than many of us about mining and profits
'Hysterical' mining industry claims 'complete rot'


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

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.

Originally Posted by 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 - <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>

John

John

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.

Originally Posted by 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.

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
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.

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

Originally Posted by Lotz-A-Landies

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

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

Originally Posted by 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

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.