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Australia just this week unveiled a mining "super tax" that the country plans to levy against its natural-resources sector starting in 2012.
This is bad news.
It's not just because mining is Australia's most important economic sector: Australia is also an enormously important supplier of resources to the fast-growing economies of East Asia, where so many of the world's products are now manufactured. The mining super tax will cause prices to rise on the raw materials that are the key ingredients in so many of those products. And that means the levy from "down under" truly is bad news for the overall global economy.
With the newly announced mining super tax, Australia has shot itself in the foot. In doing so, unfortunately, it may also have peppered the rest of us with buckshot.
The Not-So-Super Tax
The rationale for the mining super tax (apart from ordinary government greed) was that the percentage of mining revenue taken in taxes and royalties by Australia's state and national governments has declined during the past few years as mineral prices have risen.
That's occurred because royalties are set at a fixed price per metric ton, and therefore decline in relative importance and prices rise. The new super tax would take an additional 40% of mining-company earnings – over and above a "reasonable" return on capital, defined as the yield on long-term Australian government bonds.
From the mining companies' point of view, this is an extra heavy burden. Since Australia's corporate tax rate is already 30%, the new super tax would raise the marginal rate on most profits to 70%. That's grossly excessive. It will badly discourage new exploration in boom years, since the additional profits to the mining company from a new discovery would be modest, indeed.
From an economic perspective, this is very dangerous.
You see, mining is a highly cyclical business. Every now and then, prices zoom up. When that happens, a surge in new exploration takes place – everybody gets out his pick and shovel … and starts bashing away at rocks. That big up-tick in activity eventually results in a surge in production (after a delay that depends on the mineral concerned, and that may be prolonged by environmentalist opposition). The production surge brings prices back down, and brings the overall market back into balance.
Australia – the world's major source of several key raw materials – has actually created a disincentive to new exploration, which adds to the delays that are already caused by environmentalists, government permitting, and other parts of the exploration process.
That will make those already-existing mineral cycles that we described much more extreme. Indeed, it may do major economic damage if a particular crucial mineral (copper, for example) is in short supply: The price of that now-scarce resource – instead of collapsing after a year or two – may actually keep rising.
The Fallout
Looking at it from the other end, you can see why Australian Prime Minister Kevin Rudd wanted the new tax – it will give him lots of juicy new revenue to spend on pet projects (after all, he faces an election in October).
But here's a fact that's sure to shock you: Instead of improving Australia's budget position, the new mining super tax will actually make it much more difficult. And here's why. When prices are high, the tax will generate a bonanza of revenue – which will no doubt be funneled into all sorts of new projects and programs. But when prices fall, the tax will serve as a spigot that shuts off the revenue stream – leaving officials to search for funding for those new programs and thus exacerbating the cyclicality of Australia's resource-based economy.
The effect will be similar to that of California's capital gains tax, which left the state with a horrendous budget problem when the dot-com bubble burst in 2001. The only saving grace of this super tax is that – even if passed by parliament after the October election – it will not come into effect until 2012, by which time resources prices may have declined, making it irrelevant.
The worst effect of the new tax on the world's mining companies is the boost it gives to government greed in other countries. Australia is one of the world's main mining centers and is generally regarded as a business-friendly country.
Up and down Latin America and Africa, dodgy dictators and sleazy socialists will now feel themselves empowered to renegotiate existing mining contacts to give themselves more of the loot. In short, worldwide-mining-company profits have been endangered by Australia's foolish action.
There are at least three countries in which mining company profits may be less-affected by new super-tax-type levies – namely the United States, Canada and China.
In the United States, a change in mining company taxes of this kind would not bring in all that much revenue – relative to the U.S. budget problems – and would provoke a huge-and-prolonged political battle.
Canada – like Australia – is a major source of global-mining-company profits. Canada – unlike its Australian counterpart – is run by a conservative, pro-business government that is well aware how fortunate the north-of-the-border nation is to have the large resources sector that has deflected the fallout from its southern neighbor's financial-crisis-spawned recession.
And China, whatever its faults, has shown no inclination to copy the mistakes of foreign countries, so whatever deals are now possible there will remain possible.
Companies to Watch
As mining company investors, we have been badly affected by Australia's action – regardless of where the companies we've invested in operate.
Of course, BHP Billiton Ltd. (NYSE ADR: BHP), headquartered in Australia, has been badly stung by the move: Most significant of all, its iron-ore joint venture (JV) with Rio Tinto PLC (NYSE ADR: RTP) has been put in doubt. Rio and BHP, the No. 2 and No. 3 iron-ore exporters, are seeking to combine their Australian operations in 50-50 JV; Bloomberg News reported that a "material-change clause" in the deal agreement could be triggered by the super-tax law, enabling Rio to pull out of the venture.
However, companies such as Cliffs Natural Resources Inc. (NYSE: CLF) – which has only moderate exposure to Australia – have also been badly affected, and even mining companies like Teck Resources Ltd. (NYSE: TCK), which have no substantial operations in Australia, have been knocked back.
Truly the Australians have managed to shoot us ALL in the foot.
[Editor's Note: With Martin Hutchinson, Money Morning readers have seen it time and again – the kind of creative, profit-focused thinking that's allowed him to succeed again and again where other experts have failed – one right after the other. And Hutchinson has pulled off this string of successes in the face of the worst financial crisis since the Great Depression – a financial crisis that, not surprisingly, Hutchinson is widely credited for having predicted and warned about well ahead of time.
For those who aren't regular readers, and who might like an additional illustration of Hutchinson's abilities, consider dividends, the icon of the super-conservative investing set, and gold, the safe-haven nest of perpetual inflation hawks.
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News and Related Story Links:
- Bloomberg News:
Australia's Fraser Says Resources Tax 'In National Interest.' - Bloomberg News:
Australia Mines Tax May Set Trend, Raw Materials Group Says. - TheFreeDictionary:
Disincentive. - Australia Prime Minister Kevin Rudd:
Official Website. - Bonanza:
Website. - InvestorWords.com:
Cyclicality.
I agree with your comments here. As an Australian I am hoping that Rudd will backflip on this decision as he had on most of his others.
This is very dangerous for us Aussies and as you have stated, impacts the rest of the world too.
And besides all that, it is just plain rude to apply a tax to an industry just because they are still profitable in the current climate. And no, I am not in anyway involved in the mining industry.
Very very bad news..
As an Australian I agree with Rudd as to whether it should be 40% is another issue.
Why should we sell our resources cheaply for others to make super profits without sharing in the windfall as well. We are not a quarry for others to enrich themselves at our expense.
They may be getting away with it in third world countries but those countries still remain third world even after many generations of enriching the mining interests.
Criticism is not unexpected from commercial interests who have been having and continue to want to have their cake and eat almost all of it themselves and try to intimidate that the 'sky will fall on this country and the world' if they receive less. Where have we recently heard this all before?
Aah, it's good for the world economy the mining interests claim but they only divide the benefits with their shareholders.
What would you expect from a Social Democrat. We had a similar problem in British Columbia in the 1990's when the NDP almost completely destroyed the mining industry with excessive government rules, fees, bureaucracy etc. It's just plain idiotic.
Interesting as always. Australia has been one of the countries well placed for the future with its wealth of natural resources. Does this tax suggest that it is now better to abandon Austalia as an investment? Thanks.
I would hope Australia is an inspiration for other resource rich countries to follow suit aka, oil.
You can't build things out of the ether just as cars do not run on ether either.
Don't blame all Australians, some of us didn't vote for this fool. KRudd is on a "power" spending trip before the next election and will do anything to get re-elected. KRudd and his Labor cronies have been in power for over two years and have done nothing but spend the surplus left by the previous Liberal party and put Australia in more debt. Now they need more revenue to spend, hence the new Mining Profits Tax. KRudd is a very good "spin doctor" who appeals to those who can not, or do not wish to, read between the lies, sorry lines.
This a very typical situation in Australia. Greed sets in and the Australian Government is truly "the greediest". I am an Australian citizen but find it is much more profitable to live elsewhere, particularly Asia. The tax on private individuals, particularly if you make good money, is horrendous! If there is a way to gain more money from companies or the individual then the Australian tax department will find it. I believe that the tax rates are probably one of the highest in the world. Mining, being one of Australia's biggest industries is certainly a sitting duck for the tax office greed. The thought of 70 % tax is ridiculous…there is no incentive by companies to expand or in fact continue their business. Even the best accountants are having difficulties to find any loop-holes. Typical of governments to stuff up the system!
Ian, please educate Ed (above) … he doesn't seem to get basic economics … but he has clearly been absorbing all the socialist propaganda undoubtedly spewed on the nightly Australian news … I say that because Liberals are Liberals, regardless of the host nation in which they reside. Regardless of nation, the Liberal only wishes to function as the sanctified-with-holy-water victim to justify being a member of the parasite classes of society. I wonder how much longer we are going to tolerate these fools. Look at Greece … a nation of brainwashed man-children, acting out because they were too damn lazy to do the right things … just grabbing the government candy thinking all would be taken care of 'somehow' … DISGUSTING … and we in the U.S. are in almost the exact same place due to the exact same pathology among our electorate, which is why I now have no problem excoriating fools when spotted … the time for tolerating this nonsense is simply OVER folks.
Alister, I do have an economics degree unfortunately it is Keynesian and not from the Austrian school. I am however an independent thinker and not a sheeple. In the end sheeple get fleeced and end up as a lamb roast on the dinner table of their good shepherd.
Ian,
Greedy Government indeed, 'sounds like the pot calling the kettle black'. Why bother keeping your Australian citizenship – give it up, stay OS and everyone will be happier. Could it be you like 'having your cake and eating it too' with the opportunity to bolt back to Australia if the wind changes in your preferred country of tax haven domicile or you have a need for quality or emergency medical treatment.
No one is mentioning the fact that the Govt would cover 40% of the companies losses as well or that State Royalties would be rebated by the Federal Govt under the program. As briefly mentioned in article the Govt will only tax profits over the Australian Govt bond rate but not mentioned was that they are considerably higher (50-100%) than other sovereign AAA rated bonds.
I admit that details still need to be resolved re the actual rate and whether based on earnings before or after interest and other costs are included. Just like any other major resources player why should the Govt give away its exact final line re negotiations as there is at least 2 years, legislation and an election to occur yet.
Well,well,well
I am a mining engineer from Queensland, my brother's wife went to Nabour school as did young Kevie.
I started in a coal mine at 14 and learned about "bloody hard" work.
I have now lived in China for 4 years and Asia for 12 years.
I know a little of the Chinese culture. First the slap in the face with Rio, down a little bit lower.
The Chinese are humble,gentle people but like anyone they treasure respect.
Their memories are as long as their history. Need I say any more. A former prime minister, Gough Whitlam once said "God save the queen because no one will save the Governor General"
Mr Rudd may ask where his help will come from. Don't look to Peking.
Lets be clear China is not world social welfare. China is out for China's primary welfare not Australia's or the worlds. The Rio deal didn't go ahead not because of Australia but because the China deal collided against British interests in Rio.
Ah, Ed is a globalist … this means he's been watching too many Hollywood movies and actually believes the story lines.
Gough did not survive because his minister wanted to buy back Australia's natural resources by borrowing $4 Billion for that purpose back in the early 1970's. What a bargain that would have been for the Aussie's now. The money would have been paid back long ago just through inflation alone.
Well, It is 5 months since I made a prediction about Mr Rudd's future.
I knew something would happen but to return him to Peking in less than the Emperor's clothes he last worn when there, is surely poetic justice.
Knowing the little I do of their nature, they will smile and greet him with all the grace he would have got previously.
I hope he is humble enough to accept their welcoming gestures with the same graciousness. Maybe visit me Kevin in Shenzhen I like to know more about Nambour.
Sorry, but I'm with the Aussies on this. My sister in law works for govt. in Canberra, and the Aussies are starting to understand what "ecological limits" are.
They can only sell these natural resources once, and as economic growth is defined as "an increase in the rate of exploitation of the earth's resources" , we all need to start understanding about the limits to growth, for our species anyway.
The only thing that can grow continually is debt.
The aussies also realise they cannot keep suffering the effcts of climate change, and winge about it, if they keep selling coal to china. They have to stop somehow for their own sake.
Common sense surely??
Gee Peter, I guess you haven't heard yet that man made global climate change is a complete fraud. I'm all for environmentalism but only the stuff that makes sense. In the last 40 years Mother Gaia has been turned into a modern pagan religion taking us back to nature worship … you've grown up watching too many Bambi movies and buying all the hysterics. I meet Urbanites constantly who have NEVER seen a horse, a cow, or been anywhere but in a shopping mall … they are the ones who 'care' the most, 'know' the least, and unfortunately are allowed to vote with a litmus test of basic intelligence. Al Gore just bought a 9 million dollar mansion on the BEACH in California after his YEARS of screaming about ocean levels rising. I don't know your age, but I guarantee you that legions of students have been totally brainwashed over the last 20 years especially, and it has been done worldwide to create an atmosphere of fear to promote the expansion of Government nannyism worldwide … it's really quite ridiculous that folks buy into this crap. Iceland just launched more 'change' into the climate than man could in 50 years. Think about it.
Im with you peter they are our resources and the only reason why the whole world is raping Australia is because we have given them everything for nothing.Try and get these resources out of any other country for what they have here (FAT CHANCE)
PS. we have to get rid of RUDD anyway because this new tax wont cover his spending by a long shot
I DON'T UNDERSTAND WHY POLITICIANS WANT SOLVE THE PROBLEMS JUST WITH "TAXES"
I BELIVE ALL PEOPLE IN THE COUNTRIES MUST PAY TAXES, BUT THE BEST GOVERNMENTS
ARE EFFICIENT WITH LOW TAXES AND GIVE STIMULUS TO PRODUCERS, TO FIX THE ENVIRONMENTAL DAMAGE OF MINING, WE NEED THAT THE MINING COMPANIES REMEDIATE
AND CREATE A NEW SUSTANABLE WAY OF PRODUCTION ON THE SITE THEY EXPLOTED,
MORE TAXES WITHOUT HIGH BENEFITS, IN A NEW SLAVERY FOR THE GOVERNMENTS AND ITS BAD ECONOMICAL POLITICS, THEY MUST BE WORRIED TO SOLVE THE BIG CHALLENGE
OF REFORESTATION, CLIMATE CHANGE, TO SAVE THE OCEANS, NEW CLEAN ENERGIES, MORE EDUCATION, SAVING THE HUNGRY IN THE WORLD, INCREASING FOOD PRODUCTION,
MORE RESEARCH SUPPORTS, FOR EXAMPLE: I PROPOUSE ALL ENGLISH SPOKEN COUNTRIES
GET A BIG STRATEGICAL ALLIANCE, USA, CANADA, GREAT BRITAIN, AUSTRALIA, SOUTH AFRICA, KENYA, INDIA, JAMAICA, BAHAMAS, AND ALL ENGLISH SPOKEN, TO CREATE THE SUPER POWERFUL ALLIANCE TO FACING CHINA, LATIN AMERICA AND OTHERS EUROPEANS
AND BRIC COUNTRIES….
JESUS GLEZ (GEOLOGIST)
Excuse me Jesus. The Chinese are "English" speaking too!
I believe that the government of Australia has to reflect on the consequences that the"new planed super tax of 40%" would have for the mining companies and the prosperity of Australia in the futur. By the way Australia knows the royalities set a fixed price per metric tons. Australia belongs as well to the worldwide leading countries of minings together with South Africa and Canada. I think Australia has to go once again over their books in this matter for considering all the consequences this might have for their economy, especialy the mining sector. The best thing would be if all parties, the government of Australia and the worldwide operating biggest mining companies, Rio Tinto, BHP, Anglo American, XSTRATA and Vale Rio Doze would sit around one table for discussing this matter, so that at the end an acceptable agreement in favour of the mining companies could be found, that means no planed super tax of 40% – or at least an acceptable agreement for both parties. Otherwise if they don't find an agreement, for example it might happen that in the futur the investments for new exloration projects will be sharply reduced and Rio Tinto and BHP the two worldwide leading Australian mining companies might consider to transfer their head office on abroad as e.g. Glencore and XSTRATA, which both have their head office in Zug/Switzerland where very low taxes have to be paid. In this case I doubt if this would be better at the end for Australia in the financial point of view if they lose two important tax paying companies, that will pay their taxes in the futur on abrad. It would also damage the good reputation of Australia as leading mining country.
Ride on Jesus!! You are my man!!!! At least someone out there in the world has some common sense regarding these issues! All governments are corrupt-some just more dictorial , power hungry and oppressive than others. I'm not sure the U.S. will fit into your proposed alliance category anymore-we have a new dictator as you are aware of by now!!!! He wants 70% taxes and more-I think it's called socialism, marxism, communisim or something like that!!!!!
The 70% is the point Rudd wants to negiotate from as any % point no matter how low the mining lobby would complain so why not start high and if it results in say, 50% all parties will claim victory.
I don't see why Australia shouldn't impose mining levies. After all, I don't see why the government should allow mining companies to come in and bleed their country dry without doing something that benefits the populace as a whole and send the profits to a multicultural elite in other nations. Ok, maybe a completely flat percentage system would be better, but the Australians are completely entitled to expect to benefit from their country's resources.
Australia is a welfare state, and the socilistic mind set of the government and some Australians, is the same as the crazed control freaks that govern comunistic countries such as China.They whish to micro mananage and tax entrepreneurs or anyone who is willing to put time and money into increasing the productivity of the economy of the nation. The only reason the Australian economy is strong is because of the resources that it has, because the unions have destroyed the manufacturing base of Australia. Hence what little strenght there is in the economy is as a direct result of THE RESOURCE sector as it allows investors to at great risk to explore for minerals to be removed through mining (WHICH BY THE WAY PROVIDES THE MATERIALS FOR THE GOVERNMENT INFRASTRUCTURE PROJECTS WHICH RAISES THE COST OF THE PROJECTS THERE BY REQUIRING GREATER TAX WHICH IN TURN DISCOURAGES LESS INVESTMENT) there by creating jobs and attracting more overseas investment into the economy allowing even our currency to retain some of its purchasing power. What I find incredible is that these people that say you should spread the wealth through taxation say nothing about a private organization like the Reserve Bank of Australia that controls the Australian money supply which the government has to borrow from and then pay back, with interest HENCE THE REASON for high taxes because the government can only pay back what the Reserve Bank conjured into existence the interest is the productivity of ever worker, productive industry (which Australia has none) and the resources of the nation. The tax is not there to spread the wealth it is there to stifle investment (investment is what truly distributes wealth) and to pay for the interest of powerful bankers that control the world money supply and use socialism to dupe people into thinking that by slowly allowing governments to increase taxes, and to increase control over the population they are doing a good thing. Becuase it is debt that is enslaving Australia and is the reason for this tax on resources so that the ever increasing debt bubble can be held up, while the biggest transfer of wealth and power in history is happening right before our eyes.
Timbo, what really destroyed manufacturing in Australia and for that matter in the UK and the USA is government policies of the past sucking up to the idea of economic rationalism, the level playing field, the discredited notion of man-made global warming before the 'Climategate' fiasco and other pet projects of the new world camp facilitated by a largely inert sheeple population who focus on the trivial societal distractions advanced by media.
Timbo. Why is it that the people against this tax seem the most hysterical panic merchants going around? I'm surprised they don't all burst a major artery every time they post. What are you talking about that unions have destroyed Australia's manufacturing industry? Australia's manufacturing industry changed the day free market fundamentalism became mainstream. Do you really expect Australians would ever want to work in a factory for the same wage as the Chinese?
Another conspiracy theorist having a brain burst on the net. Deary me.
Martin, it appears as if California does not, in fact, have a "capital gains tax", at least as far as individual California Taxpayers are concerned. (Based on the California Form 540, Individual Resident Tax Return for 2009. ftb.ca.gov ). The State of California considers all capital gains as income and does not categorize it separately at a different tax rate, as the IRS does with Federal Individual Tax Returns.
History repeating itself, get rid of LABOR and K/RUDD Australia has always been in a better economic position with well managed conservative governments.
As horrendous as this is, this super tax is just the thin end of the wedge. As an Australian I despair about the Australian community's ability to elect governments. It seems that when we get a government that is competent and prudent, we have to go and throw them out by listening to the massive spin and public relations army of the Labor Party. Even the most capable Prime Minister we've had since the early 60's lost his seat. It's happened 3 times since the early 80's. It's apparent that the Labor Party has really only one objective – to get re-elected at any price. Even though we are lucky enough to be able to dig the ore from the ground, it is only that the former conservative government that tucked the $billions away that we emerged from the GFC practically unscathed. Yet at the same time they were able to deliver income tax cuts, introduce a GST that nobody really notices and have record growth. Now we have a bunch of economic theorists who are make huge decisions essentally based on what their mates (factions) want. All the while telling us constantly how great they are, and spending countless millions do it. We have an election in October and these clowns will probably get re-elected, albeit with a hugely reduced majority. And each state government except WA is Labor, and all are completely on the nose with massive issues as to competence, probity, transparency and everything else that equates to good government. It seems that as Australians when we get comfortable we get guilty about it and throw the baby out with the bath water. If Labor gets re-elected in October we will have endorsed their total incompetence on so many fronts, and the country will only have itself to blame.
If this super tax (bullet) takes place Australia will not be effected by a " shot in the foot" but it would more likely feel like a "shot in the head"…Dud is just that…As most of the world slowly recovers from its economic downturn it will be Australia's time to sink… The only thing that has saved us from sinking "down under" has been a open tap on mining Australia’s abundance of natural resources and some smart entrepreneurs that run the businesses behind them…Now the Dud wants to put his 2 cents in……..Fellow Australians don't be fooled again…vote Liberal and remove the Duds in government before we all sink with them.
The world IS NOT recovering from the global financial crisis, open your eyes, think for yourselves, there are NO GREEN SHOOTS only weeds and, just manipulated markets, lying politicians and massaged statistics supported by a compliant media beholden to their vested advertising interests. The world is slowly advancing toward a GLOBAL DEPRESSION, period. The massive media attention on Greece it to distract the public from the massive problems of Britain and the US which dwarf those of Greece and the PIIGS. Indeed California alone is a bigger problem.
Here's Prime Minister Rudd tying himself in knots as he tries to explain the difference between profits and superprofits, and justify yet another great big new tax, on Radio 6PR in Perth, Western Australia, earlier this week – http://media.mytalk.com.au/6pr/Audio/Mornings_030510_KevinRuddHenryTax.wma
I think the proposed tax is justified for the following reasons:
* Slowing down of fast depletion of Australian natural resources
* Slowing down of the aggressive aggravation of environment
* Finding sources of alternative revenue stream from non-mining sector as it is expected that the proposed measure will eventually reduce govt. revenue.
Long live Australia
Don't whinge, Australia ia one of most cost effective producers in manufacturing, mining and agriculture providing NON subsidised goods to the world. Unlike the EU, USA and other economies, Australia does not rely on government and therefore tax payers to support their businesses. Living in Australia means that those of us who work at higher incomes and pay taxes accordingly can take care of our mates (ie. those less well off). What I see about most countries is very selfish people out for themselves. Remember you cannot take your money to Heaven or indeed Hell. I am proud to be an Australian as I can hold my head high in the World as making a difference to all our brothers and sisters on this planet.
I just finished reading Adam Smiths 'Wealth of Nations" writen in 1775 where he clearly states that excessive taxes on exports destroy that export market because of the old supply and demand. Other countries also export these same raw materials and will be glad to fill the gap at lower prices and if they don't the tax will be pased back on to the Australian public when they re-import the finished products they can't competitivelly manufacture themselves.So let them tax exports at 10,000% if they want to, the higher the better, Smith didn't know of a better way to hamper the domestic economy.It will be interesting to see how many mines and scheems will be abandoned. Mining and export companies vote with their feet.l
The Resource Tax was just part of the Henry report, most of which was largely ignored. Unfortunately K Rudd has grabbed a hold of the one thing he thinks that the Australian electorate will stomach ahead of an election. Like the author of the article I too believe K Rudd has shot Australia in the foot. Why is it that there is an automatic tendency to tax the golden goose rather than recognize that without it our economy will surely falter. The best we can hope for is that common sense will prevail and we will have a change of government at the next election.
I am interested in the comments of gw peterson, but which part of Economics 101 did you miss about the aspect of "Supply and demand". The fact is that over the course of this century the world's population will most likely double. With say another 4 billion people on the planet (on top of the present 6.5 billion), demand for resources like energy, minerals and crops will become in short supply. Demand will further increase as third world countries' populations politically demand higher living standards. Australia is not only well placed, but is likely to be the major supplier of resources at effective cost of production to get them to markets. That is why most of the world's largest companies are here trying to stitch up long term supply contracts for LNG, LPG, Iron Ore, Bauxite, Uranium, oil, clean coal, food crops, geo thermal and solar technologies. There is no doubt which country will be able to have ALL it lights on. The smart money would be investing in Australia for the long term. Then there will be the next century!!!!
Rudd is a fool and is rapidly smothering the goose that has layed the golden egg I.E Resources. If he actually ran an efficient government instead of wasting millions of dollars on worthless projects then he wouldn't need to impose this ridiculous high tax on Australias growth. We'd also be paying a flat rate of approx. 25 percent tax on our income instead of getting slugged the highest rate of tax in the entire world. Now tell me all that extra disposable income wouldn't drive the economy with good growth. It's time to get rid of Dudd, he's an incompetant,arrogant,fake baffoon!! Tim NSW
You folks should be Americans! Lets just keep raping it for all it got! Give me More MONEY!!!
Thanks Martin for a Great Article, so much truth in it and so much fun reading the heart felt comments. If only the Australia Govt has more sense and control of Foreign Ownership of Companies, properties etc. The profit and dividend that generate would surely stay with the Australian people and in turn flow through the economy. The election is coming close, it's all about the govt with its 'normal' or 'super' Taxes, no different from the medieval period, to fill their FAT pockets and pay their wages and expenses and lavish spending on unproductive projects that they cannot control and whatever Rudd and his bureaucrats can pull out of their sleeves, it will continue
As an Oz I agree there should be sharing in this countries wealth but not the way our so called leader is proposing just for his own political future. In my mind we should be looking across the board and the tax should be shared on a fair an equal basis, NOT one off huge hit on our mining sector.
I can live with any tax increase as long as it's fair.A flat tax for all incomes is the only fair tax.So,if you want to increase taxes on miners by 40% that's fine as long as every individual and company also sees a 40% increase.I suspect that if Australian taxes were fair then not many would be in favor of this proposal.
Rudd and his Govt and his bureaucrats should be reading Money Morning America and Money Morning Australia like us to educate themselves and get an in depth in sight into the Australia and the world economy and what people wants and needs not just sitting in their offices like frogs in the well. In all fairness they might read a lot, they claim, through their P.A.s' eyes. Or just plainly selfish, they will retire comfortably and rich with everything and why should they care
How about, Australia nationalised all mining industries and then truly can they say, all the dirts belongs to all Australian. All income from it will go to pay for all the needs and wants of ALL Australian. Australian have heaps $$ in super fund…where it can use to buy up all the Mining Companies. If not, create a Sovereign Resource Fund..sell bonds to raise cash. Then we don't have to debate about who owns what. What do you think???? A bit like the Suadi, with their oil resource.
what a lot of garbage about the increase in tax on these multi national companies. there is no morals when we speak about money the winner takes all the loser evaporates. governments are in these days for big business or social balance. ive been living in germany for a year and realise what a great country australia is. i suggest people live in europe or america for a while and see how hard it is to live here all governments are fundamentally corrupt so is big business, its money and control dummies and when governments and authorities become totally owned or totally incompetent then we have that cancer known as greed driving the cosmos, governments ,big business,individuals all suffer with the same disease. follow your little ideologies, good luck. i say go for it, tax the bastards.
What is particularly amazing about this article is that it points out why a Resource Rentals Tax is so beneficial.
It is always better to derive public income from resources, which are both fixed in supply and with no moral justification for ownership. This is certainly better that produced goods and services which add to the cost, carry deadweight loss etc.
But even when natural resources are targetted there is an efficient and inefficient way of doing it. The inefficient way is the existing Royalties method, which, as the article points out, is based on a fixed value of tonnage regardless of market prices.
This means that in times of low resource prices, mining companies are doubly punished driving many of the small, competitive, companies out of business. In times of high prices, the companies that make hay will be those with the big economies of scale. It is little wonder then that outside of Rio Tinto and BHP, many mining companies support this change.
So the tax actually makes life more secure for the smaller mining companies, and will be massively more efficient. Let's have a look at the relative efficiency of taxes
Anyone who argues against the Resource Rental Tax is arguing for an inefficient tax base (which means that higher taxes are needed) and against the interests of small,competitive mining companies.
Anyone heard about Norway?
It has huge reserves of oil. The government owns the oil and takes most of the profits. It puts these profits away in a sovereign wealth fund so that future generations can benefit when the oil runs out.
Soon the Norwegians will have $100k per-person saved up. This coming at a time when many goverments have huge debts.
Rudd should take this super-tax and put it in a fund for the future.
We survived before mining and we will survive after it if the new RSPT is all doom and gloom as most mining companies, share holders and overseas interests seem to say. I have looked on all different types of web sites for more info and the overall tax rate on mining companies becomes lower unless you make extremely huge returns. its our ground make em pay or we go back to the sheeps back when housing was cheap and you could survive on a single income. in the end mining is our biggest money spinner in this it is nowhere near it.
The best way for Qld WA and the NT to avoid the taxation system is for us to concede from Australia. We can then put up a big fence and keep the immigrants and boat people out.
It will be funny when all these Labor voting socialists and Green voting yes men have to foot there own bill with there beloved Julia squandering there money and not money stolen from regional Australia to drip feed the bludgers that vote for them.
Hi I know a little of China after living here 8 years.
They are lovely people but they do not suffer fools.
There no monkeys in this country except the zoo\\
DR Ross Wrigley
Hello there guys… It's bad news, of course for Australia…couse mining mining is on of the Australia's most developed economic sector… I'm a businessmen from Russia and I've heard rumors about a man called Paul Deuchar from Perth, Western Australia… looks pretty interesting, I've been asked to track down some more info on him as my client is looking at putting $500m into an investment over there and needs a capable partner over there. Hoping you guys here might be able to give me some pointers.
Thank you
Artash
Artash do you mean Paul Deucher from Argon Technologies? Paul Deucher the face of ENGINEERS AUSTRALIA is one of the world’s premier engineering bodies with approximately 73,000 members nationally and over 8,500 in Western Australia.He’s very famous over here and especially in the industrial sector. If you plan business with him don’t hesitate, you found the right man. Deuchar runs Argon technology and here is the website you may visit http://www.argon.com.au/
Thanks for reading