The mining tax

[Jiska]

http://www.progressivepress.net/us-fiscal-debate-could-learn-from-norway/

Well worth a read.

I didn't like the mining tax that Gillard introduced, but the one Rudd proposed would have been great for this country. Ignoring the outrage by Reinhart and the other multinationals scare mongering the Australian people on loss of jobs etc, we would have been set up well for future generations. The way Norway has structured itself is something to be envied. At the end of the day, those minerals that are being mined belong to the Australian people and they won't last forever. We should be taking a much large slice of the profits and use them to further advance our future rather than handing them over to private corporations to make billions of dollars. Sadly though, politicians take the path of making the corporate entities a bit richer, which always assists when election time comes around and parties need funding.

It would be a nice change to have a Government, and a politically savvy voter group, which cared more about the future than the now.

 

[Grin]

At the end of the day, those minerals that are being mined belong to the Australian people and they won't last forever.

No they don't, they belong to Gina and multinationals who so kindly come here and selflessly invest in the mining industry and donate some money to the Liberal party. We owe these wonderful companies big time.

Just ask any mindless Liberal party supporting drone.

 

[Power Raid]

http://www.progressivepress.net/us-fiscal-debate-could-learn-from-norway/

Well worth a read.

I didn't like the mining tax that Gillard introduced, but the one Rudd proposed would have been great for this country. Ignoring the outrage by Reinhart and the other multinationals scare mongering the Australian people on loss of jobs etc, we would have been set up well for future generations. The way Norway has structured itself is something to be envied. At the end of the day, those minerals that are being mined belong to the Australian people and they won't last forever. We should be taking a much large slice of the profits and use them to further advance our future rather than handing them over to private corporations to make billions of dollars. Sadly though, politicians take the path of making the corporate entities a bit richer, which always assists when election time comes around and parties need funding.

It would be a nice change to have a Government, and a politically savvy voter group, which cared more about the future than the now.

both were bad

- one was poorly designed and has failed its objective
- the other would have bankrupted a nation (would you really want Rudd underwriting China's mining especially for commodities which are mined for a loss due to strategic reasons?)

I am all for taxing the mining industry better but lets not get romantic about Rudd.


The starting principles needed to be
- recognition and respect of the state. by coming to an agreement with the states as we have seen with other state issues, like the GST and the corporations act, has proven to be a better model than circumventing our constitution. After all, it is the constitution that protects the people from its government. (Ken Henry recommended this)
- it need to ensure that only profitable and economic resources are extracted which a royalty system ensures (Gillard's got this right)
- it needed to recognise the different risks and thus the risk reward ration required for different commodities (Gillard's got this right)
- it needed to be respectful of past commitments (Gillard improved this but got a number of elements wrong)
- it needed to promote refining in Australia (both actively promoted the opposite as it is easier to avoid the tax by selling a dirty product)
- it needed to be more respectful of capital costs as BHP and RIOs cost of borrowings are very different to a mid tier or smaller operator
- it needed to be more respectful for Australia's IR and education
- it need to be respectful of prospectors as they are the one's that ultimately pay the price for the tax. BHP and Rio just pay the cheques.
- it also needs to consider how the tax operates over the long term rather than just a jealous tax during a boom


Gillard's version was much better than Rudd's but the problem was, Gillard's was built on Rudd's crappy foundations and was designed to save Labor face. The tax should be scrapped and replaced with something that works.

 

[Power Raid]

No they don't, they belong to Gina and multinationals who so kindly come here and selflessly invest in the mining industry and donate some money to the Liberal party. We owe these wonderful companies big time.

Just ask any mindless Liberal party supporting drone.

you are looking at the sector with a very narrow view as you seem to only see the miner but not the prospector or the explorer.

Sure, the majors mine the major projects and thus through the stroke of luck in timing were making massive profits during the boom. But long term, they do not pay the price for the tax as they simply on-cost this to the entity who they acquire the project from (the explorer). The explorer in turn on-costs this to the prospector. Without appropriate rewards for the prospector, there is no explorer and in turn no mines for tomorrow. We need to protect the small guy!

and no they don't selflessly invest in the mining industry. they take the risk and make the effort because there is the belief they can make a profit. So why don't you take the risk or make effort?

oh and ignoring the mining tax, ignoring GST, ignoring payroll tax, ignoring mining rents, ignoring shire rates, ignoring the additional 15% for those on the highest tax bracket and just focus on two simple taxes the government is free carried 40% (calculated as 30% corporate tax, 10% royalties as expressed in effect of profits).

The problem, and the reason for the need of better mining taxation, is we are losing a lot of the value add activities such as refineries, marketing, trading and finance. What government hasn't twig onto is the reasons why we are losing these. If we were to fix our taxation for non-resident entities we will alleviate many of the issues holding these areas back. We can fix this by taxing CGT on non-residents, fix the tax treatment of non-residents investing in Australian investment vehicles, fix transfer pricing relating to marketing of commodities and increase royalties (more than we already do) for the sale of unrefined product.

So yes, I am all for taxing the industry better but narrow minded, pom pom cheering comments like above are just embarrassing.

 

[Grin]

they take the risk and make the effort because there is the belief they can make a profit.

I rest my case.

So why don't you take the risk or make effort?

Presumably because I was too lazy to inherit $ billions from daddy.

 

[Power Raid]

I rest my case.



Presumably because I was too lazy to inherit $ billions from daddy.

1) I don't care for defending Gina as I am not a big fan of hers but Gina didn't inherit billions. Get your facts right.
2) You rest your case? why do people work, invest or any other business activity (including a cave man hunting down a wild beast that could kill them)?.......a cost benefit analysis! this sometimes simplified to a potential profit.

Please elaborate on your "rest your case". I feel the need of a good laugh.

 

[Grin]

1) I don't care for defending Gina as I am not a big fan of hers but Gina didn't inherit billions. Get your facts right.

Yep she built her company from the ground up.
I could have done exactly the same if I were as hard working as Gina.

Please elaborate on your "rest your case". I feel the need of a good laugh.

I don't think you quite get the meaning of "I rest my case"

 

[Floor Pie]

Why are we so worried about increasing what Australia makes, out of the minerals that are mined from Australia?

Look at the $3billion write-down Rio Tinto made, after the Zambezi river fiasco.

We have a very cooperative Government, why wouldn't they be happy to make billions here, and put a little more into Australia?

 

[Power Raid]

Yep she built her company from the ground up.
I could have done exactly the same if I were as hard working as Gina.


I don't think you quite get the meaning of "I rest my case"

1) if you are going to make stupid comments, at least do the research when you have been pulled up. So did she inherit billions?
2) Your right you could have sat on your ass after inheriting a business which is now some over 60 years old. Yes it has taken that long to build.
3) But she hasn't just sat on her ass. She has taken the bold step to take the business from a royalty taker (letting everyone else take the risk and do the hard work) through to becoming a developer and miner herself. Personally I think this has and will prove to be foolish and she can potentially lose the lot!

So would you sit on your ass and let the royalties come in or would you gamble the lot, take a risk, make the effort and forge out your own history? Let me guess........

 

[Power Raid]

Why are we so worried about increasing what Australia makes, out of the minerals that are mined from Australia?

Look at the $3billion write-down Rio Tinto made, after the Zambezi river fiasco.

We have a very cooperative Government, why wouldn't they be happy to make billions here, and put a little more into Australia?

I don't think there would be many that don't want to see the mining industry and its resources taxed and taxed better. What we can all agree on is with the benefit of time, those arguing that the mining tax was a dog has turned out to be true.

What I think we can all agree on is the additional tax revenue generated should just be spent. Rather it should be warehoused in a fund with governments only being able to touch the profits of the fund.

How the F does a government spend more than it earns during one of the greatest booms in history?

 

[Grin]

Yep, she's very brave.
Like I said, this country owes her, and kindly multinational mining companies, big time.
Anyone who watched those adds before the 2010 election knows that.
Aint that right Power Raid?

 

[Power Raid]

What part did you think was a dog?


Like the Gov super fund?

1) it is too easy to get around
2) it penalises Australian and regulated companies whilst foreign companies can get around it easy
3) it doesn't collect the returns desired but scares of investment
4) is disrespectful of the constitution and the states
5) it actively promotes shutting down value added activities
6) it moves trading, marketing and finance off shore
- but this was still a big improvement on Rudds. Gillard understood and got the following right
- the tax should only be on low risk commodities such as coal and iron ore. it should include all bulks as these businesses are not "mining" businesses, they are logistics companies meaning they have a low risk.
- refer above for the others



like the gov super fund? no, that is an example of spending it before you earned it. So I guess I mean the exact opposite plus some.

 

[Power Raid]

Yep, she's very brave.
Like I said, this country owes her, and kindly multinational mining companies, big time.
Anyone who watched those adds before the 2010 election knows that.
Aint that right Power Raid?

OK, you hate Gina. I am not a big fan either. So we agree on something.

She will probably lose billions trying to get a mine in production herself for the first time so you can celebrate her failure.


Now, what is your point?

and have you worked out how much she inherited? How many billions or millions were you off? Does it hurt to be so wrong? I can't think of any other reason why you don't just provide an honest response.

 

[Jiska]

I don't think there would be many that don't want to see the mining industry and its resources taxed and taxed better. What we can all agree on is with the benefit of time, those arguing that the mining tax was a dog has turned out to be true.

What I think we can all agree on is the additional tax revenue generated should just be spent. Rather it should be warehoused in a fund with governments only being able to touch the profits of the fund.

How the F does a government spend more than it earns during one of the greatest booms in history?

Good points.

Would it not be better than to have an inadequate tax and alter that tax to make it better rather than scrapping it altogether?

I don't see the Libs having any type of mining tax policy whatsoever. Probably because of the impact on political donations.

 

[Grin]

and have you worked out how much she inherited? How many billions or millions were you off? Does it hurt to be so wrong?

It does.
I thank you for correcting me and I concede now that she truly is a self made woman.

To be as wise and well informed as you I really need to start watching that Andrew Bolt show of a Sundee morning.

 

[Power Raid]

Good points.

Would it not be better than to have an inadequate tax and alter that tax to make it better rather than scrapping it altogether?

I don't see the Libs having any type of mining tax policy whatsoever. Probably because of the impact on political donations.

I have thought of this but an important failing in the tax is the fact it is not worked up from the states. It is essentially an unconstitutional tax which cleverly worked around the law. As such, it has very little room to move or be improved without tripping up over itself. So we have no choice but to scrap it and start again from a structural point of view.

The next mining boom is many years away, so any repeal would mean stuff all in lost tax revenue under the current scheme. So we have time to get this right and it demonstrates the federal government is negotiating in good faith.

It also means our Aussie assets can be taken back by Australian companies. As the current regime favours foreigners and although scrapping it doesn't favour Australians, at least we are on the same playing field.


Further, Ken Henry's original template was 90% there. So other than negotiating with the states, we have a good starting point. but I would add some elements which promotes refining, promotes education and training within the policy (not the law).

 

[Power Raid]

Good points.

Would it not be better than to have an inadequate tax and alter that tax to make it better rather than scrapping it altogether?

I don't see the Libs having any type of mining tax policy whatsoever. Probably because of the impact on political donations.

I don't know who Gina writes cheques for but I think that is obvious (liberal)
Twiggy on the other hand is a labor man

 

[slicedndiced]

hang on Power Raid . Gina didn't inherit billions of dollars worth of untapped resources in tenements held by her father and Wright??

wut??

 

[slicedndiced]

Twiggy on the other hand is a labor man

Stop now. I mean really??

 

[Jiska]

I have thought of this but an important failing in the tax is the fact it is not worked up from the states. It is essentially an unconstitutional tax which cleverly worked around the law. As such, it has very little room to move or be improved without tripping up over itself. So we have no choice but to scrap it and start again from a structural point of view.

The next mining boom is many years away, so any repeal would mean stuff all in lost tax revenue under the current scheme. So we have time to get this right and it demonstrates the federal government is negotiating in good faith.

It also means our Aussie assets can be taken back by Australian companies. As the current regime favours foreigners and although scrapping it doesn't favour Australians, at least we are on the same playing field.


Further, Ken Henry's original template was 90% there. So other than negotiating with the states, we have a good starting point. but I would add some elements which promotes refining, promotes education and training within the policy (not the law).

Good points again.

The problem is that by scrapping the tax, or to be more precise making it a yes or no tax, it has now made it a politically sensitive topic. In any format, a Government is unlikely to look at implementing it again for fear of political backlash. Hence my point re keeping the tax and altering it. The problem we now have is that the Liberal Party can't really introduce a better tax along the same lines, given that they campaigned so hard against any such tax in the first place (unless they do a GST type backflip, but unlikely given their ties to big corporations) and the Labor party would be suicidal to introduce the tax again given what's just happened.

I agree the tax was grossly inadequate, but I think the Liberal Party would have been better highlighting the inadequacies and ways they plan to fix it (like they are doing with the NBN, of which I completely disagree with, but at least they aren't just scrapping it) rather than just scrapping it altogether.

Whether we have a mining boom or not is largely irrelevant in my eyes. We need to be proactive, not reactive. The tax should be nutted out and clearly in place before any boom comes along. Realistically we are blessed with natural resources. If we set up a tax structure properly, there is no reason why it can't be used to fund our future. Norway, for example, fund a lot of infrastructure projects simply off the interest they earn on tax collected on minerals. Australia's biggest immediate issue is being able to raise funds to fund critical infrastructure investment. The only realistic way we have to raise capital at the moment is to raise personal tax and that is not a sustainable long term plan.

 

[Grin]

The problem with the MRRT was that the mining sector would have collapsed just as industry lobby groups predicted would happen with the passage of native title legislation and the repeal of work choices.
Just as the petroleum sector collapsed with the introduction of this tax:
http://www.industry.gov.au/resource...n/PetroleumResourceRentTax/Pages/default.aspx
The Petroleum Resource Rent Tax (PRRT) is a profit-based tax which is levied on a petroleum project.

Well at least that's what some of the mouth breathers on this board would have us believe.

 

[Jiska]

The mining sector would not have collapsed at all. They just would have made 500 million instead of 600 million.

Realistically, though, the tax should be on volume mined, not on the profits of the company.

 

[Power Raid]

Good points again.

The problem is that by scrapping the tax, or to be more precise making it a yes or no tax, it has now made it a politically sensitive topic. In any format, a Government is unlikely to look at implementing it again for fear of political backlash. Hence my point re keeping the tax and altering it. The problem we now have is that the Liberal Party can't really introduce a better tax along the same lines, given that they campaigned so hard against any such tax in the first place (unless they do a GST type backflip, but unlikely given their ties to big corporations) and the Labor party would be suicidal to introduce the tax again given what's just happened.

I agree the tax was grossly inadequate, but I think the Liberal Party would have been better highlighting the inadequacies and ways they plan to fix it (like they are doing with the NBN, of which I completely disagree with, but at least they aren't just scrapping it) rather than just scrapping it altogether.

Whether we have a mining boom or not is largely irrelevant in my eyes. We need to be proactive, not reactive. The tax should be nutted out and clearly in place before any boom comes along. Realistically we are blessed with natural resources. If we set up a tax structure properly, there is no reason why it can't be used to fund our future. Norway, for example, fund a lot of infrastructure projects simply off the interest they earn on tax collected on minerals. Australia's biggest immediate issue is being able to raise funds to fund critical infrastructure investment. The only realistic way we have to raise capital at the moment is to raise personal tax and that is not a sustainable long term plan.

I really feel revenue should be taken out of the hands of government. We should have an independent body like the RBA setting the big tax issues and revenue. The government should be able to tweak things not implement or do wholesale changes.

but I guess that is a price you pay for a democracy.

shame the debate couldn't have been kept to "let's tax the industry better" and honest debates as to why it was good or bad. Unfortunately the debate was tailored for an electorate that simply didn't have the time to hear or understand the issues. Thus the debate was about hearts and minds and thus emotionally driven.

 

[Floor Pie]

1) it is too easy to get around
2) it penalises Australian and regulated companies whilst foreign companies can get around it easy
3) it doesn't collect the returns desired but scares of investment
4) is disrespectful of the constitution and the states
5) it actively promotes shutting down value added activities
6) it moves trading, marketing and finance off shore
- but this was still a big improvement on Rudds. Gillard understood and got the following right
- the tax should only be on low risk commodities such as coal and iron ore. it should include all bulks as these businesses are not "mining" businesses, they are logistics companies meaning they have a low risk.
- refer above for the others

Your points 1- 6 are just rhetoric.

3) for example, it doesn't collect returns, but scares off investment?
It is set up so it doesn't have any returns until the individual case has reached annual profits of $75 Million , and then it is only charged on the super profits.

When you say "the tax should only be on low risk commodities such as coal and iron ore". Do you mean "shouldn't"?

 

[Grin]

If Rudd hadn't just rushed into introducing the legislation in his usual manor. If he'd 'war gamed' it and predicted the industry response...
If Hawk or Howard had implemented it, I imagine the approach and build up to the introduction of legislation would have been far more strategic.
It's a real pity that we missed out on getting a better return for our mineral wealth.