Thread: 40% Tax

Originally Posted by JDNSW

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.

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.

Originally Posted by JDNSW

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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

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.

Originally Posted by JDNSW

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

Originally Posted by Captain_Rightfoot

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.

Originally Posted by Brian Hjelm

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

Originally Posted by Lotz-A-Landies

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

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.


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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.