Thread: 40% Tax

Originally Posted by Brian Hjelm

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

Originally Posted by LandyAndy

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!

Read Laurie Oakes article in today's Herald Fun.

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

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.

Originally Posted by 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

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

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

Originally Posted by Legion

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.

Originally Posted by Legion

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.

Originally Posted by Legion

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.

Originally Posted by Legion

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.

Originally Posted by Legion

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.

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.

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
People like win win suituation like it is happens now with the 40% tax.
As long there is greed we do not have a hope