Mad or not, Kevin must fight for the mining tax

persephone says:

10:56am | 13/05/10

Super D

that’s not how it works at all.

I’ve already put the figures up on this site, but I’m happy to repeat myself endlessly if necessary:

Rate of return   Effective tax rate now   Proposed
6%                      45.4%              28.0%
10%                    40.9%              39.5%
15%                    38.7%                45.3%
20%                    37.6%              48.2%
25%                    36.9%                49.9%
50%                    35.5%                53.3%

Source: http://www.treasurer.gov.au/DisplayDocs.aspx?doc=economicnotes/2010/018.htm&pageID=000&min=wms&Year;=&DocType=4

So it is not 40% above 6%; in fact, a company earning 6% profits would see their tax bill fall in real terms.

And the tax is not linked to achieving the surplus, but goes towards programs.

Scot says:

12:01pm | 13/05/10

It is too much to ask that Rudd would discuss this with the mining industry. No he takes a report from some organisation is his bible ad goes for it. If he did this to the Unions they would tell him where to get off as well. The big buyers of resources will but elsewhere and also invest elsewhere. The miners have more robust financial models than Rudd and Swan ever will have to know the consequences of this folly.  They juts make these press grabs. Rudd was saying on Sky new he would not be negotiating with the industry his team would be and they would then submit it to cabinet. Rudd never said that he would be making the decision??? He is already protecting himself from the flak. Check it out for yourselves, and by the way the body language is perverse. We should have only $19B in debt of Rudd, Gillard, Tanner and Swan had not been so reckless with our money.

Super D says:

12:08pm | 13/05/10

Pers should have known you’d show up from the spin bunker.

Firstly the linkage between the resources tax and the spending programs is completely artificial.  That the government has chosen to link the two for political purposes is their busines.  The test on genuine linkage would be if the forecast tax receipts did not materialise the spending would be immediately cut.  Unless you’re suggesting that a collape in resource income would result in higher corporate taxes and reduced superannuation contributions?  I didn’t think so.

So the rates you have posted demonstate that as soon a miner makes 10% on their money they get slugged with higher taxes.  I’m not sureif you’re familiar with the mining industry but the blokes (and women) who spend their lives traipsing the desert are looking for a little more than 10% for their troubles.  Finding stuff to dig up and sell isn’t easy.  You, like our novice treasurer Swan are clearly not familiar with fundamentals of corporate finance or you would know that a super profit could only occur once the required rate of return for the investment has been achieved.  For mining projects the required rate of return is likely to be above 20% and possibly higher.  Under Swan’s “New Finance” the required return for a risky project is deemed to be the risk free rate.  I don’t think you realise how innovative this is to the world of finance.  Swan could be up for a Nobel Prize.

Don’t get me wrong, I’m all for super taxes for two specific sectors:
1. in the banking sector - our societies need profitable banks, their profits were underwritten by the government during the GFC.
2. in supplying the public sector - the govt has drawn a long bw in claiming that undiscovered resources in the ground belong to taxpayers.  It is however reasonable to argue that government money belongs to taxpayers and anyone involved in supllying services to taxpayers should not be entitled to super profits.  I think it’s worth noting that the PM’s wife is today a very rich woman as a result of super profits earned supplying government services.

Overflow says:

12:21pm | 13/05/10

Persephone,
The reason the miners are angry is because Rudd and Swan made the tax applicable to existing projects AND failed to consult with them prior to announcing the change.  While I agree that this mode of taxation is far more efficient and “fair” if implemented as was outlined in the Henry review the simple fact is Rudd ran away from true reform by failing to take on the states to eliminate royalties and exploration fees.  You and others deliberately mislead when you quote Clive Palmer requesting this tax when it was specifically on PROSPECTIVE ventures due to the need of stability.  As I said I am all for true tax reform, sadly this is a grab for money from a PM who could not bring himself to fight for real change but then again there is nothing new in that.

PS what will you say when they change the policy after the election??

persephone says:

12:25pm | 13/05/10

That’s what he’s doing at present, Scot.

And given that they proposed the tax themselves, what was there to discuss?

AC says:

12:30pm | 13/05/10

@Persophone: “So it is not 40% above 6%; in fact, a company earning 6% profits would see their tax bill fall in real terms.”

So a miner who invests in high-risk mining projects who achieves a return equivalent to the risk-free bond rate will be better off. Woo hoo!

Cameron Price-Austin says:

12:40pm | 13/05/10

@persephone

I keep hearing that mining companies ‘proposed the tax themselves’.

Do you have any further information on this? I read an interview where they said they had been fighting for a commonwealth taxation and royalty scheme for some time (as opposed to the inconsistent and volatile state-based system which exists currently).

If this is what you’re referring to, it’s hardly the same thing, is it? They weren’t fighting for higher taxation, just more consistency, and my understanding of the new tax is that it won’t replace the existing state-based royalties.

persephone says:

01:02pm | 13/05/10

Cameron, gave you the links yesterday.

The mining company wanted royalties removed because they vary from state to state.

The feds can’t remove royalties, due to the constitution, so they’ve done the next best thing. By refunding royalties, even to companies which at present are not profitable (but would normally still pay royalties regardless) they will remove that anomaly.

Of course, it would be better to remove royalties altogether, and that is what probably will happen long term.

persephone says:

01:04pm | 13/05/10

SuperD & AC

they pay less than they do at present, which is a bonus in anyone’s language.

Jones says:

01:09pm | 13/05/10

The thing that annoys me is that I believe in equality.  If you are going to tax one business at a certain rate, you need to tax all businesses at the same rate.  Whether that’s defined by your ABN/ACN, ASX listing, whatever, the tax rate should be fair and equal across the board.  This thing with picking on one industry is just plain disgraceful.  If a small business can’t survive with the proposed tax reform, you need to rethink the tax reform.  (And, realistically, if this is about Australians getting their Fair Share of resources, there are other ways around it - licencing fees perhaps?).

The thing that scares me is that our gracious PM has demonstrated just this last week how willing he is to make snap changes without consulting, well, anybody (cf. smokers’ tax).

This is a man who shoots first and asks questions later, and picks who to shoot by figuring out which kid has the most lunch money.  This is nothing more than playground bulling on an enormous scale.

Super D says:

01:11pm | 13/05/10

Actually Persephone royaltis should not be removed.  If you accept that Australias resources are finite then Australia should receive a payment based on the use of these finite resources.  A royalty achieves this.  Note that this has nothing to do with profitability.  The exploitation of the resource triggers the royalty, not its profitability - which is actaully how it should be.  The fct is once its dug up and shipped out it is gone from the nations assets, whether or nt some bloke made a buck, made 2 broke even or did their shirt doesn’t matter.  The fact remains that the resource is no longer there and hence the Australian nation should be compensated for its departure.  If royalties were abandoned this would lower the marginal cost of production in lean times, resulting in Australian resources getting used up and Australia not being paid.

The royalty regime is in use all around the world.  This new tax is not - well except in venezuala but the rate thereis only 34%.

It is clear that you know absolutely nothing about the mining industry aside from what Kevin and Wayne have told you.

luke09 says:

01:13pm | 13/05/10

Taxing miners, smokers, land owners, investors etc.. targets a single group of society to pay for all, why not just raise the gst, that way everyone pays for building a better Australia, rich or poor.

Overflow says:

01:22pm | 13/05/10

@Persephone

“Of course, it would be better to remove royalties altogether, and that is what probably will happen long term. ”  That is exactly what Henry recommended and Rudd failed to promote this reform and yet you and Labor continue to misquote Henry and claim miners will be better off.  A question Pers how many mines not starting up would be an acceptable price for this tax grab??  How will this great cooperative federalist government encourage the states not to raise royalties and when will this occur?

AC says:

01:24pm | 13/05/10

persephone says:02:04pm | 13/05/10

SuperD & AC

they pay less than they do at present, which is a bonus in anyone’s language.

Do you have any knowledge of economics at all? It is not a bonus, there’s something called opportunity cost and risk. Risk should be compensated for and investing in a high risk project requires a higher return for taking on that risk. You won’t see any miners sticking around for a 6% return. Why would they invest in mining when they can get the same return by investing in a risk-free bond?

Cameron Price-Austin says:

01:24pm | 13/05/10

@persephone

I had to go looking to find what you meant: I didn’t read that article yesterday.

Yep, it seems that they had suggested something similar back in 2005. It’s also correct that existing state royalties are refundable credits against the super tax.

But in fairness, a couple of things you failed to point out:

The 2005 proposal would only have applied to new projects, not existing ones i.e. the tax was not known at the time of investment.

Also, 2005 was quite some time ago. The market and economy have changed significantly since then (e.g. GFC).

Really, your argument makes no logical sense anyway. Why would they ask for a tax, then fight it? The only logical conclusion is that the economic and regulatory context has changed.

Andrew says:

03:06pm | 13/05/10

Importantly the government and their Punch propaganda officer Persephone have failed to reveal what the definition of “profit” will be.

In a recent discussion (last week) Swan said it would be determined in relation to EBITDA (Earnings Before Interest taxes Depreciation & Amortisation).

If that is the case then HOUSTON WE HAVE A PROBLEM!

If what you are saying is you have a 50% return on capital and expenditure and therefore you have to pay 53.3 % tax then effectively your after tax profit will be 23.35% .... or will it?

If you then have to service debt through interest at say 10% (probably higher because cost of capital in mining ventures tends to be 11-15%) then your original profit is 45% not 50%.

Then you need to depreciate and amortise at conservatively 10% of capital cost, so now you’re down to 40%.

So if your 50% profit was $100, you got taxed $53.30 AND with D & A had already cost $20 you therefore have $26.70 net profit or 13.35%.

And that’s if you make 50% at EBITDA stage!

Final points, Swan was questioned last week in W.A. about the level of Super Tax kick in being Long term bond rate rather than cost of capital. I sh*t you not, he did not understand the question.

Secondly, and this was in a published report from Southern Cross Securities this Monday: Mining Exec to Rudd “Why are you going after us why not the banks?”
Rudd: “They’re next”
(Its in the “Under the Southern Cross” report either Monday or Tuesday.)

Finally, I read today that the “consultation” trumpeted by the government does not allow a discussion of the tax itself and is only addressing implementation. Xstrata execs reported furious for going to a useless meeting yesterday. RIO and BHP said they are going and will be tabling their issues anyway, even if the government refuses to discuss.

Overflow says:

03:19pm | 13/05/10

@Andrew, you hit the nail on the head !! This govt and supporters like Perseophone have NFI when it comes to what sort of damage they will incur by implementing the tax as it is proposed.  As long they get re-elected on the back of some populist “fair share” argument all will be OK.

Tim says:

04:41pm | 13/05/10

Andrew,
if that was true then according to Persephone’s and your own figures, a company making 50% return currently gets 22%.
So the new tax would be an extra 8% or so tax on these companies earning 50% profits.
This increase in tax reduces dramatically as the returns reduce.
I suppose it doesn’t sound so dramatic if you say it like that but does it?

from the trenches says:

06:06pm | 13/05/10

Given that the intended super tax regime intends to reimburse miners for royalties paid to states- ie the amount they actually pay for minerals extracted based on tonnages etc -and tax their profits how can this be anything esle than a ‘tax grab’. Arguably the miners are getting their minerals for free courtesy of the Rudd money-go-round. (Great opportunity for creative accounting here.) So much for the people of Australia getting their just share of our non-renewables.
The real problem with the whole proposal is that the supertax was cherry picked from a comprehensive review of the tax system. In doing so the outcome lacks coherence and balance and puts into question the just how anything meaningful will eventuate from the revue if the intention is to continue select bits for political gain.

persephone says:

06:31pm | 13/05/10

Cameron

Not sure what you mean by 2005, the submission was made in November 2008.

http://www.businessday.com.au/business/big-miners-cry-foul-but-this-is-what-they-asked-for-20100505-uat2.html

Jones

This does provide equality.

Petrol and minerals are the only two commodoties I can think of (and sorry, I have bronchitis at present so some of the synapses aren’t quite connecting) that are non renewable.

Petroleum products at present attract taxes using an almost identical regime as that proposed for mining (and have been doing so for decades).

So this tax brings our two non renewable resources into line.

Super D

well, the mining companies want royalties removed, so go argue with them.

They think it creates uncertainty, makes it difficult to compare investments between states and creates confusion.

Um as for being an expert, I don’t claim to be, and I doubt the other handful of commentators here aren’t either. Why not question their right to comment?

And I don’t rely on Wayne and Rudd, as the range of links I’ve provided on various posts over the last few days would demonstrate.

AC

strangely enough, miners at present pay taxes (royalties) for enterprises which are making a loss, because they gamble on their being profitable in the long run.

So if they stick around whilst mines are losing money, when they start making 6% - with less tax on that than they pay at present - they’ll hang around longer.

Even when they get to making twice that amount of profit, they’ll be paying less tax then they are at the moment.

Obviously your understanding of economics is very limited.

Andrew

most people can cope with working out what a profit is, but the definition for the purposes of this tax is one of the items under negotiation.

Again, I tend to think Treasury are better at those kind of calculations than you are.

luke

yep, that’s right - let’s put the tax burden on to pensioners and low income earners, especially those on a fixed income, rather than industries which even Tony Abbott has suggested (when spruiking his paid parental leave) don’t pay enough.

Overflow

if the royalties are raised by states, then that will not affect miners, but create an argument between the States and the Feds.

Jones says:

09:14pm | 13/05/10

Persephone, while you may be entirely correct about the similar tax on petrol, you didn’t address either of the two issues I raised.

All businesses should be subject to the same taxation system.  If a particular resource has special requirements, deal with that separately.  Perhaps the petrol tax needs to be re-evaluated?

And the smash-and-burn decision-making tactics of Mr. Rudd don’t inspire confidence.

Tim says:

10:40am | 13/05/10

is water a non-renewable resource now?

persephone says:

10:58am | 13/05/10

Water, unlike minerals, is a renewable resource.

We mightn’t have enough of it, but we do get more of it coming along every year, so we’re not going to run out of it.

Whereas our mineral resources are finite and - unless you wait a few million years - are not replaced.

acker says:

12:01pm | 13/05/10

If water is so renewable why is the Government buying it back and destroying our community ? .....And why should’t they pay our community for the rent on the river in our shire it flows through ?

persephone says:

12:28pm | 13/05/10

They are buying water back not because it’s not renewable but because there isn’t enough to go around.

If communities are being destroyed, it is because they have made the hard economic decision that it’s not worth farming an area any more and sold the only asset they have that’s worth anything, their water right.

No one forced them to do this. It was a decision they made themselves.

Most farmers are grateful that there is someone out there who wants to buy their water license off them, allowing them to leave the land with less debt and some dignity.

Tim says:

12:43pm | 13/05/10

Acker,
I know there hasn’t been much of it around lately, but you have heard of rain before? That’s what makes it renewable.
Why should the government pay your community rent for a river it doesn’t own?
And the government isn’t destroying your community, it’s previous years of water over-use by farmers on marginal land that’s responsible for that.
The amount of water used in cities in a drop in the ocean compared to the amount used for irrigation.

Rob r Charteris says:

08:37am | 13/05/10

And of course when the housing bubble blew up here our mining industry colapsed…. you have no idea. Whether or not they have a housing bubble in China, it has nothing to do with their mining boom. Do you really think china is going to stop buying minerals if their housing bubble bursts??? are you really that stupid.

AntiMajorMistakesor Others Man says:

11:02am | 13/05/10

@ Rob r Charteris, all that spinning is making you dizzy mate. TrueOZ left out, the other half of the story.

Every economy in the world other than BRICOZ, Brazil, Russia, India, China & us is completely, totally & utterly buggered, for another 2 to 5 years depending on how gutless their governments are going to be at cutting spending & raising taxes???

How long do you think China can continue growing, if the rest of the world is continuing to buy, less Chinese big screen TVs, toys, etc?

China’s economic growth has already slowed down a lot & will continue slowing. Its only a matter of, by how much? And how soon?

Regards the former snag & swinging voter.

AC says:

12:27pm | 13/05/10

Rob, are you really that stupid? A collapse in housing will have a massive effect on the Chinese economy - have a look at what has happened in the US. What do you think will happen if the Chinese economy goes down the same path?

TrueOz says:

09:47pm | 13/05/10

Rob, I’m sure you’ve spent considerable time in China (not) and seen the rows of completely empty buildings. I’ve spent time living there and can absolutely assure you that they have a property bubble the likes of which we can only begin to imagine here. I’m not sure if you know this, but building requires the kind of resources that Australia digs from the ground - resources which China once purchased to turn into exports products - but which it now purchases to fuel its construction boom. When the Chinese real estate bubble bursts (and I can assure you that it will) property prices will plummet. When this occurs construction of buildings and other infrastructure with ZERO demand will cease. China has no real domestic market that can afford the goods that it produces and it will also cease to manufacture products that it has ZERO market for. It is at this point that Australia will not be able to sell commodities to an economy that no longer requires them (at least not at previously charged prices). Kevin Rudd and Wayne Swan are naive at best and a pair of self-serving bull-shit artists at worst. It’s time for you to stop swallowing the crap that they feed you, start thinking for yourself, and draw some reasonable conclusions. Then again, that’s probably asking far too much of you.

Sherekahn says:

08:40am | 13/05/10

Then those whingeing about their “Super” should invest in Banks, Woolworths and Coles, then stop their whingeing.

Bruce says:

08:47am | 13/05/10

Gareth: Answer is simple, you will pay for it through increased interest rates, fees, charges, reduced service from the banks. Supermarkets will have no choice but to increase all grocery lines and reduce service levels as well. The government will not touch it with a 10 foot barge poll. Not going to happen !!

Roja says:

10:32am | 13/05/10

They both don’t make money selling what the Australian people own though do they?  Miners do.  Banks would simply increase their margins and make the same money, where miners can’t - the crap about ‘they will increase their margins and everything will be more expensive’ is a lie, they don’t determine the prices of iron ore, the international markets do.  Also how many people in Groceries populate the BRW rich list?

Russell says:

12:22pm | 13/05/10

Roja & all you others that keep on about the miners selling what’s ours, my money, which the banks like taking so much of to make their super profits is a lot more mine than the resources in the ground

persephone says:

11:01am | 13/05/10

Mushrooms don’t spin. They tend to stay in the one place.

If your head is spinning, I would suggest that you are using the mushrooms in the wrong way.

Voxpop says:

09:25am | 13/05/10

Super is a long term investment and it’s the mining companies themselves who have been talking their own stocks down.  If I had spare $$$ I’d be buying up shares as others in the know have been doing.

persephone says:

11:03am | 13/05/10

Absolutely - if you have a spare buck, invest in mining shares now.

Luke, this tax came at the suggestion of the industry itself (I provided the proofs yesterday). The 40% figure was suggested as recently as February by the likes of Clive Palmer.

Of course the mines want you to think they’ll all be ruined. It’s their duty to their shareholders to try and maximise profits by reducing outgoings, and that includes tax.

russell says:

12:25pm | 13/05/10

persephone, the figure suggested by the INDUSTRY ITSELF was on the premise that STATE ROYALTIES would be removed, not 40 % on top of royalties, sounds to me like you’re the one doing all the spinning pal

persephone says:

12:39pm | 13/05/10

The Federal government can’t remove state royalties, so it is refunding them, even when a company hasn’t made a profit or paid tax.

Voxpop says:

12:42pm | 13/05/10

Russell that’s why the Feds will rebate the State royalties making it an even playing field.

Hamish says:

01:13pm | 13/05/10

Yes Perse, they are refunding the royalties, but still making an extra $9 billion in 2013/2014 (assuming the China boom continues). So, they are increasing tax well above and beyond the amount paid in royalties.

As I’ve said before, this is a dumb tax which penalises companies for being successful. Royalties based on amounts actually taken out of the ground would be much more sensible and fairer on the Australian people and the companies themselves. They would then be rewarded for being efficient rather than punished.

Over time the revenue from this tax will decline as fewer projects are brought online. Another reason it’s a dumb tax. I remember you once said Perse that good taxes affect behaviour as well as collect revenue. Perhaps you could explain what behaviour this will result in? Maybe making companies less likely to invest in mining in Australia?

Tim says:

01:30pm | 13/05/10

No Hamish,
it makes them more likely to invest in Australia because they only pay the tax once they are earning large profits. Less viable mines become more likely to continue operation for longer earning Australia more $$$ and the highly profitable mines continue operation as normal with a larger proportion of the profits going to the owners of the resources, Us.

Hamish says:

02:09pm | 13/05/10

Tim,

Frankly there’s no point in having non-profitable mining companies. We want the profitable ones, not the marginal ones. What’s the point in letting non-profitable companies take finite resources out of the ground?

Tim says:

03:17pm | 13/05/10

Hamish,
its more about the actual mines and resources themselves than the companies.
A profitable mine in which the resources can be dug up easily should not be taxed at the same rate as a more marginal mine which may require more exploration, infrastructure and logistics.
This tax is designed to increase the marginal mines viability, whilst increasing the government’s take from the more profitable ones. This will allow more investment in exploration and development of areas that may otherwise be unviable. It should increase the overall government take from our finite resources.

Andrew says:

04:01pm | 13/05/10

Um Ok. So we should…. alter the nature of the return to the lower productivity area ... tax a company into profitability ... hmmm .. a little spurious I think. Let me explain why:

Commodity prices are high because there is demand for them outstripping supply. Of course miners go after the lowest hanging fruit (resources near the surface with lowest strip rates etc). As those resources become harder to find or more difficult to produce, the price rises and then mines that were previously marginal are now worthwhile.

If you try to make less productive mines more profitable now by taxing success over mediocrity you will interfere with the natural flow of capital and cause commodity prices to DROP. Why I hear you ask? Because you are making everything just above marginal. I could really go in to some detail but I think you get the drift. For some light reading on the subject go to Porter’s Competitive Theory, and Davenpoorts Competing on Analytics both HB Press. For the alternate point of view read History of Eastern Europe 1945 - 1989

Tim says:

04:48pm | 13/05/10

So Andrew,
are you saying that all the modelling the Treasury and Henry did is wrong?
And anyway, according to you all these mining companies are going to stop production and leave Australia. Surely this will cause commodity prices to skyrocket.

Hamish says:

04:49pm | 13/05/10

Thanks for replying on my behalf Andrew. Governments skewing resource allocation is a very bad idea and has always been. I find it ironic the fellow-travellers are suggesting that encouraging more mining of our finite resources (by making it more profitable to mine at less profitable sites) is a good idea. What would Gaia think?

Companies will eventually start mining the less profitable sites as resources become more scarce and this scarcity is reflected in growing prices. The unsustainable demand from China is already encouraging companies to look at sub-optimal sites, there is no reason for the government to further encourage this…unless of course they just need cash real bad. It’s a pity they don’t have Cash Converters for sovereign governments.

Andrew says:

05:14pm | 13/05/10

No tim, the flows will go into other countries with less sovereign risk. We are being re-rated as an investment destination as we speak. If you refuse to listen to another point of view you really aren’t worth have a discussion with.

soultrader says:

09:32am | 13/05/10

And your valuable conribution is ? Oh that’s roght - Insult from the hurting left-wing. Your Super Star Kevin has lost his shine, is about to go Super-Nova and disappear up his black hole.
I can not believe that you are gullible enough to still fall for the con-job by Rudd & Swann & Co. They have deserted the working family. Get over it and Vote Independent.

Peter says:

09:42am | 13/05/10

Rob I would suggest that you are the Dickhead hiding behind your name with your typical Labor trait of playing the man and not the ball.Rudd is in real trouble and is looking rather flimsy.I would suggest you hang on tight I can feel you slipping away.

Roja says:

10:47am | 13/05/10

Ooh you touched a nerve with the Peter the righteous left wing liberal (right / left is dead, I mean really) - all because Abbott has a Latham-esque lead in the polls. Do you realise phone polls are opportunity where everyone in Australia has a chance to voice dissatisfaction?  Where they put the X is another matter altogether

Peter says:

02:39pm | 13/05/10

This is another Peter.. Despite my reputation, i do not call people dickheads on this thing.. And people pull me up on my manners… Go figure..

Sherekahn says:

08:47am | 13/05/10

“Fair and equitable?”  With everyone being NIMBY?  your joking!
It sure will meet the country’s needs soon!

Tim says:

10:53am | 13/05/10

Your example is wrong as the mining companies already have to pay company tax and state royalties. Its not 40% on top of these.

DocBud says:

01:16pm | 13/05/10

The tax will be on profits over 6% before company tax, so if you want a 15% pre-company tax return, you will need a 22% pre-company tax return to yield the same after tax income.

persephone says:

11:08am | 13/05/10

Except that the rent tax money goes to an entirely different place than the ETS money.

The rent tax money is paying for a series of measures in the budget; the ETS money is going straight back into taxpayer’s pockets in the form of compensation.

Whether or not the ETS is in place makes no difference to the budget. (money intended for the ETS has gone to other climate change initiatives, some of which would be unnecessary for the government to fund if an ETS is in place, and therefore can be easily redirected).

Extra money from the ETS cannot replace the mining tax.

LV says:

12:54pm | 13/05/10

So persephone why do labor keep claiming that the budget would be back in surplus earlier if the ETS had been passed???

You are not seriously trying to say that every dollar raised was going to be paid as ‘compensation’ ???

You people are so full of it I don’t know how you can function.

persephone says:

01:08pm | 13/05/10

LV, reference for that? I’ve never heard that claim made before.

And yes; in fact, the government will be paying more out in compensation than they will receive.

It’s not my fault if you’re ignorant.

lv says:

01:57pm | 13/05/10

Persephone, I must of heard it a dozen times over the last few days.
Why pretend??
I just don’t understand it, hence the reason I don’t work it politics. 
Children lie willy nilly - adults grow out of it.  Most people don’t believe you can’t see them because they are hiding behind their finger. You use one fact as a finger and think it hides the bulldust behind it.

persephone says:

06:11pm | 13/05/10

LV, so you will have no trouble finding a quote, a link or a source.

Please provide one.

lv says:

10:03pm | 13/05/10

Would a NORMAL person really spend the time do that?????
I have a Life. And a business. And 10 people working for me who expect to get paid this week.
How about you promise to spend 3 hours doing nothing other than looking for one and if you can’t find it I’ll give $100 to charity of your choice.
I’ll give $200 when you do find and post the link of just one quote of a labor person stating what I posted.

Steely Dan says:

12:58pm | 14/05/10

@LV

Geez, most people would have just admitted they can’t find a quote.

lv says:

02:44pm | 14/05/10

@SD
LOL I’m not a political staffer. I wouldn’t know where to even start looking for any of the kinds of random quotes/articles etc the persephone puts up, yet she put them up in a flash.  No doubt this is stuff you learn as a staffer, media spin 1.1. I haven’t done that course.
If you know an easy way to find a quote you hear on the radio let me know and I’ll find it for you:)  I have a real life tho and The Punch is a 15 min a day hobby and I’ve already used up 10….

The Drover says:

11:33am | 13/05/10

Yea, their going to go down for the count.

persephone says:

11:31am | 13/05/10

Firstly, the miners do not ‘create’ wealth.

They dig it up.

The tax proposal encourages exploration and development, by returning royalty money to companies and providing other incentives.

Until they make profits in excess of 12%, they will pay less tax than they do at present.

I point out again, the mining industry actually proposed this tax and some of their most prominent figures proposed the 40%.

See this for what it is: an attempt by the mining companies to get the tax rate lowered, a duty they owe to their shareholders.

If you still want to defend it, do so on the basis of the facts.

Hamish says:

01:44pm | 13/05/10

Perse, what is the point of your continual bleating about less profitable companies paying less tax. This is not good. You want to encourage companies to make a lot of profit. This leads to better dividends for shareholders and more money available for new projects. Rewarding companies for not being profitable is exactly what you don’t want to do.

And as I’ve pointed out below, the proposal will result in more taxation. The Gov is paying back the royalties and still making an extra $9 billion on top. Don’t try and mislead people by suggesting it’s revenue neutral for miners. It’s beneath you.

Miners ‘create’ wealth by digging it up and digging it up more efficiently than others.

AdamC says:

04:24pm | 13/05/10

It is totally naive to dismiss mining as merely ‘digging wealth out of the ground’. Minerals aren’t worth much to anyone in the ground, Perse.

And no-one is arguing miners shouldn’t pay some rents or royalties for the stuff they dig up. The problem with this tax is a) it imposes greater taxation overall (as Hamish says) on the industry and b) encourages the maintenance of marginal projects at the expense of new projects.

Really says:

07:33am | 14/05/10

Persephone. It’s an insult to suggest that “miners do not ‘create’ wealth.
They dig it up.”

Value is created by the investment of money, time, human capital, energy, science into a piece of dirt that ortherwise has no intrinsic value. Mining is a sophisticated industry, as value adding as any other.
By your definition you might as well say that the fish you buy should be free - fishermen don’t create wealth, they just catch it. Etc etc. You can play the same trick for any industry. Michelangelo didn’t create wealth he just removed useless pieces of marble from a block.

Willy K says:

10:32am | 13/05/10

We do.  It is called RRT Resource Rent Tax and Miners have been paying it for ages as well as the most Company Tax in Australia.

Anything more is simply Socialism.  If the Govt wants it - dig it up themselves!  Don’t let PRIVATE investors do ALL the work, spend ALL their money then GOUGE them when you send the country broke.

Rudd said he would ensure that Australia does dot just link itself to mining into the future - this was an election pledge!  What a lying little weasel.

Jane says:

10:43am | 13/05/10

Just like the fishing industry hey?....or the forestry industry?....or farmers? All ‘our’ land. Better whack an extra ‘great big tax’ on them too then?
Get a grip.

You’re welcome to ‘dig it out of the ground too…pay for licences, invest a few billion into the necessary equipment,research and so forth as well…as anyone is…so orf you go. Too easy isn’t it.

We do get ‘a portion’ already…..it’s called tax and royalties….same as any other.

Rambo says:

10:44am | 13/05/10

You already get a portion. The state gets a huge portion.  When evaluating a project, a big mining company takes all the taxes, costs, etc into account and if it achieves the desired ‘hurdle rate’ ie. enough to pay back the cost of starting the operation plus some gain for shareholders, then they apply to dig up that resource.  They have a duty to take all the inferred resource and not leave anything less than marginal.  Its a win win for state, federal, company, shareholders, and jobs for australians.  Why increase the tax rate? Why make it harder for mining companies to get a project off the ground?  If anything Australia should encourage mining companies to be here.

Roja says:

11:23am | 13/05/10

Have any of you read how this is to be applied?  Actually Read the Swans recent press release in full (not the media reproductions), it’s 1983 all over again.  If this is going to kill investment, how did the $50 billion Gorgon project get off the ground - it’s offshore so it already subject to this tax regime which has been in place for 27 years on our flourishing off shore gas & oil indutry. 

Jane - fishing & forests needs to be regulated so that we continue to have fish & trees - minerals don’t grow back.  If farm land is on top of expensive minerals, we tend to ditch the farmers. 

Plenty of companies pay both rent and company tax, this is about the rate of rent and the return to Australia of the product it owns.  There is another crack pot country that expects a 40% return on what it allows these companies to dig up and sell, the USA. 

If this tax is applied from a project start up, it’s perfectly fair and encourages marginal mining as they will only return the company tax & income tax - not unfair royalties that would otherwise make the mine unprofitable. 

The main issue miners have is that it applyies to existing projects, which is harsh and will most likely be the key point of any negotiations.

Tim says:

11:27am | 13/05/10

Yes Jane,
get a grip.
We are talking about non-renewable resources, so your fishing and farming comparisons are completely false.
Before you go crazy about this tax, why don’t you go and actually read how it is going to work.
The more profitable areas will be taxed at a higher rate whilst the less profitable areas actually get a reduction in their tax rate.
This tax makes it far easier to get a project off the ground because you only get taxed the higher rate once you are earning high returns rather than the old system where you get taxed on production.

Voxpop says:

12:29pm | 13/05/10

To put it simply the current system of tax for mining needs replacing as our % take has decreased while the mining companies are enjoying ever increasing profits.  The RSPT addresses this imbalance and will ensure that Australia benefits from it’s own resources.

“In 2005-06 the mining industry had a profit of $30 billion and they paid $8 billion in taxes. In 2008-09 their profits were over $90 billion and what did they pay in taxes? They paid $11 billion.” 

They enjoyed an extra $60 billion in profit and our extra take was a pittance of only $3 billion.  Surely no-one out there thinks this is a fair return on our non-renewables - once they’re dug up they’re gone.  We need a better return on them rather than allowing profits to go overseas.

Voxpop says:

02:09pm | 13/05/10

Link for my quote above comes from Senator Cameron in question time yesterday
http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;adv=yes;db=;group=;holdingType=;id=;orderBy=date-eFirst;page=0;query=mining profit tax 30 billion 90 billion;querytype=;rec=10;resCount=Default

Saskia says:

11:00am | 13/05/10

persephone - you forget to have ‘Written and authorised by the Australian Labor Party’ at the bottom of your comment.

We all know that Cr!key and GetUp! are wings of the ALP.  Thus, their comments are worthless.  Their pretense of neutrality is hilarious.

The Guardian says:

11:35am | 13/05/10

Saskia
Your ignorance is hilarious! Who owns The Punch….News Limited! The same company that uses the Fox Network in the U.S to champion the Republican party. The same company that runs The Australian et al and champions conservative politics in this country. A little knowledge is dangerous isn’t it !!!!!!!!!

Persephone I admire your resilience and passion in the face of constant attacks by psuedo intellectuals and bitter half wits.Keep it up the good fight never ends.

persephone says:

11:54am | 13/05/10

Saskia

All I am doing is saying that Leo is wrong to say there isn’t other polling on the mining question.

Pointing out that there is is scarcely party political.

It’s not my fault that the Essential poll shows there’s support for the tax.

I’d suggest it’s very one eyed to reject sources without looking at what they have to say, but if that’s all the argument you have….

Saskia says:

11:58am | 13/05/10

Yes the same News Limited that owns papers in Australia - the majority of which endorsed Kevin Rudd as their preferred PM before last election - yeah that one.

Or the Murdoch the same owner that endorsed Tony Blair and Labour in the UK for years.  Yes your point is about as well made as your usual comments.

The tax is a dog, Rudd Govt is a dog, Crikey and GetUp are ALP rags and you are just one of their last remaining loyal peons.

persephone says:

12:36pm | 13/05/10

Leo

Firstly, thanks for being open to criticism. I’ve had posts pointing out errors by other writers on this site mysteriously vanish, so I do appreciate it.

My point about the poll had nothing to do with Rudd’s popularity, but as to whether there had been another poll other than Neilson on the mining tax, but you know that.

As for the CPRS: look, I’d rather it had gone ahead. But I’m a political realist, and there’s little chance of getting it through the current Senate.

Rudd has been consistent on the question of a DD. He has never said that he would take the CPRS - or any other issue - to one, but would prefer to serve his full term.

Antony Green had an interesting article, which pointed out that, in terms of getting the CPRS passed and implemented, there was little time difference between going to a DD or holding a normal election.

That being so…and happy to have the point argued….Rudd is simply being consistent - he wants to go full term, there is no advantage gained by not, so he may as well.

That said, if I were Rudd and contemplating a DD, I wouldn’t be telling anyone until after I’d visited the GG, so it’s still possible.

And - just to pre empt anyone who thinks I’m contradicting myself - Rudd has said a DD would only be called if it becomes obvious the government can’t govern, so a lot depends on the attitude of the Senate over the next few weeks.

The Guardian says:

12:38pm | 13/05/10

Saskia,
It must be difficult to live in a mind set of constant fear as you do. How many different alias’s are you using on here?. You say that Get Up’s pretense of neutrality is hilarious. What pretense? They do not pretend to be anything other than what they are,a group of political activists who are passionate about what they believe in. What do you believe in Saskia? By the way, do you actually know anyone who reads Crikey?

Perhaps you should take a leaf out of Tony Abbotts book Saskia and vent you frustrations and feelings of constant inadequacy by going for a bike ride, but be careful of all those ideological silly billy socialist students on the road riding next to you their a vicious lot who when not studying are plotting the downfall of capitalism by asking questions such as why does it have to be this way?.Tag Saskia your it!

Willy K says:

12:55pm | 13/05/10

Saskia - I think you hit a few raw nerves with ‘The Guardian’ there!

They don’t like their philosophy exposed as hollow, flawed and illogical do they?

Spot on about Crikey and GetUp - total propaganda disguised as ‘independent’ comment and ‘news’.  What a joke.

The Guardian says:

01:40pm | 13/05/10

Willy K
“They don’t like their philosophy exposed as hollow, flawed and illogical do they?” Who are they? Oh I know Willy “they” are the one’s who usually believe in universal health and education,equitable but fair distribution of prosperity based on effort and enterprise,fairness and openess within the political, commercial and social landscape,“they” are the one’s who cry foul when companies and individuals interfere in all of the above for short term gain,“they” are the one’s who look to the future of a nation and “they” are the one’s who ensure accountability.So Willy you must be one of the “others”, those who whinge why should I? What about me?. My taxes my taxes. As a rule Willy I tend to find that most of the “others” are nothing more than sniping ideologs who can not see the forest for the trees. It would seem Willy that you are just another example of a right wing thinker who attributes any contrary view other than your own to socialism. By the way does your blood boil when our service men and women and returned soldiers refer to each other as comrade?

Saskia says:

02:10pm | 13/05/10

Yup.  Sure hit a raw nerve!

Ryan says:

02:34pm | 13/05/10

@The Guardian : other than your rants and offensive remarks, do you have any actual contribution to the topic at hand?

Nicole says:

03:35pm | 13/05/10

Saskia wins ! ! !

Saskia says:

11:49am | 13/05/10

Sounds like one of Pol Pots’ early speeches!  You student socialists are such silly billies with no grip of economics whatsoever.

soultrader of Rannville SA - Zero Industry - Zero says:

11:56am | 13/05/10

Disincentivisation - works great - look what happened to the Eastern Bloc Countries. Why do you think the wall came down? They were broke!!!!!! Even the Socialist states had those that were more equal than others. Evne Communist China has those more equal than others. People of the USSR and the eastern bloc lost all incentive to strive for better or more. They sat on their butts and received “their share”. What a fantastic way to live. I can sit on the boat fishing every day and just get my fair share of the country’s income. Thanks - I love it.

Coaster says:

12:07pm | 13/05/10

Beam me up Scotty! Utopia awaits!

Coaster says:

12:15pm | 13/05/10

So who will be the producers for all those consumers?

Henry says:

11:54am | 13/05/10

That’s the attitude Adolph!

Comedian says:

12:11pm | 13/05/10

Henry says: That’s the attitude Adolph!

Poor form Henry on many levels…

Roja says:

12:30pm | 13/05/10

Ah Henry, are you not aware the best way to lose a debate is to refer to Hitler?  The same goes for Pol Pot, Commies and Eastern Bloc countries. 

This is the tax rate for mining in the US, a country notorious for communism and it’s occasional bouts of despotism. 

When the truth comes out about what this tax means, it’s going to expose Abbott.  Just you wait and see.

Willy K says:

01:20pm | 13/05/10

Cecil - that’s the spirit Stalin!

Diddy says:

07:11pm | 13/05/10

Well said, just the type that needs to stay home from the NAPLAN test

The Guardian says:

12:56pm | 13/05/10

Well said Peter.

luke09 says:

01:22pm | 13/05/10

So you wouldn’t mind running a huge company, buying and replacing machinery , explorating with no guarantees, paying employees, paying back investors capital for explorations for little profit.
There are a lot of risks involved, it is not as easy as you say.

Rupert says:

01:37pm | 13/05/10

“I’ll pay 50% tax, if Rudd gives me a lease to a good property.. “

Says it all… “gives me”.

No capital investment. no intellectual capital no nothing.  You just want things given to you on a plate.  The work behind getting a mine to profitability is beyond belief and clearly beyond your rudimentary socialist intellect.

But there we go.  Ruddites and their “I want what the hard workers are getting even though I don’t need it, nor deserve it - I am just jealous and spiteful” philosophy.

No wonder Waugh dubbed socialism as the ‘creed of spite and envy!’

Peter says:

02:15pm | 13/05/10

@ Rupert, sorry mate, what do these mining magnate get? A lease, are they not displaying the Give me attitude you refer to… I fully expect if i had a lease I would fully invest in capex and opex to do what was required, and I would happily take millions or billions in profit even if it meant i paid 50% tax. I would be doing better than i am now… I would not lay claim to those minerals belonging to me because I had a lease and i was greedy. The fact remains these minerals belong to all of us, not a bloke holding a lease (and that is a privilage in itself). It is not socialism to lay claim to something you own. It is criminal activity to lay claim to something somebody else owns, like these magnates..

@ Luke, i don’t mind working hard for lots of money.. I understand the risk/reward of owning a company, especially if im just selling a product im digging up from the ground that doesn’t belong to me… Im sorry mate, as a big a capitalist as i am, i do not claim ownership over other peoples assets…

luke09 says:

02:56pm | 13/05/10

Peter, it is not a criminal offence to make profit from mining, yet. If it was so easy to make money from mining why don’t the government mine our minerals and make all that money.

Peter says:

03:03pm | 13/05/10

@ Luke09. Im not saying it is criminal activity to make a profit, that’s what we are all about.. But these minerals do not belong to magnates and it is a privilage that we allow people to make money from it.. i’m sure if a government wanted to do it, they could, but we don’t operate that way…

luke09 says:

03:19pm | 13/05/10

Peter, point made, in an ideal world we would mine our own minerals and get full benefit but the 40% super tax rate seems excessive.
Investors should be rewarded for risks and get a decent return on their capital investment, miners wouldn’t be able to start a company let alone explore if wasn’t for the investors money.

Andrew says:

03:27pm | 13/05/10

So Peter, I gather that means, ALL Australians own the mineral wealth of this country.

You’d have to admit, that’s an interesting proposition. If you believe it’s OK for a company to invest billions on exploration, development and operations for a government to then come in and say, “hold on we want more of your success” because those resources belong to all of us, then what is the difference between that situation and say China sending 500,000 troops down and saying, “you know we’re expanding, your getting rich off our expansion, we all live on the earth therefore everything in the earth belongs to all of us, we’re gonna take it”?

Just explain to me why that is any different.

Given your character, as it appears here, if you were chinese you’d be telling us to suck eggs and if you were Australian you’d be whingeing, but one thing I’m quite certain of, you’d actually be doing nothing.

Tim says:

04:25pm | 13/05/10

Andrew,
you do know the difference between a sovereign nation and a mining company don’t you?

Andrew says:

05:18pm | 13/05/10

Is that your answer?

Seriously, self interest and might wins every time. Read some history. All that being said and done, you do know the difference between property rights, security of tenure, certainty for investment and nationalisation don’t you?

Jeff says:

06:13pm | 13/05/10

Peter , I am with you on this one.

Peter says:

07:46pm | 13/05/10

@ Andrew, we are talking about a 40% tax on profits, not the value of the minerals. The minerals are given to them for free (virtually) to sell. If i give you my golf clubs and told you to sell them for me and give me 40% of the profits, would you feel hard done by?

If we lived on the nation of earth, then the chinese might be able to lay claim to our minerals, but because we live in the nation of Australia, they are ours.

Peter says:

07:56pm | 13/05/10

@ Andrew, please don’t tell me you call this tax nationalisation? There is a massive difference.. The government will not be aquiring any share in these miners..

@ Tim, I think the Government did announce some benefits/breaks for start up companies, but don’t ask me to quote you what they were as i don’t recall the detail…

persephone says:

01:13pm | 13/05/10

luke - evidence that the BER has failed?

My local paper is filled with principals saying how fantastic their new facilities will be. They don’t sound anything but genuine.

Mr Tatsyrup says:

01:49pm | 13/05/10

Persephone - not all of us read ‘Workers Daily’ or the ‘Green Left Weekly’.

Ryan says:

02:47pm | 13/05/10

@persephone : If you take into account value for money, rorting, and expense then its an abysmal failure… not for a few big building companies though, they sure made a mint at the taxpayers expense.

Roja says:

04:21pm | 13/05/10

Where did the billions of cost come from again?  I thought the instillation scheme was allegedly a failure because 4 people died working for shonky get rich quick business owners, while over 100 house fires were linked to incorrectly installed insulation (up from the annual average of 80 fires linked to incorrectly installed insulation).  That leaves 999,900 homes with insulation it never had, saving most taxpayers money and reducing the amount of energy we consume as a nation.  While about 20% of the BER projects suffered at the hands of shonky building industry contractors - I presume you infer that all of them were directly employed by the ALP. 

You could equally point out that the Liberal party consumately failed when they left office as they had no major projects scoped and ready to go should there be a downturn to take advantage of the lower building costs.  Nope, in 2007 they once again spent billions of our money in a failed attempt to buy votes rather than ever having any sort of plan for the future. or leaving a cash fund for the impending GFC.

Clearly, your reflection of Howard and his legacy differs somewhat from reality.

Andrew says:

03:31pm | 13/05/10

Are you sure he mentioned giving virginity “only at the highest price”?

I suspect you may be verballing him.

Nicki says:

04:50pm | 13/05/10

@Andrew.
Maybe he said to save virginity for someone special.
So we should save our minerals for someone special who will satisfy and will take care of Australians when we get old and without “virginity”.
Who will look after you and your children?I don’t think the mining company, they will be long gone with the money.
Just look at problem we have with asbestos and JH Industries.

Henry says:

04:05pm | 13/05/10

Should be a caption competition…

“...blub..blub… but Pennnnyyyy….. the big boys won’t let me in!...”

or

“... no I’m not Elmer Fudd Premier of Austria. I’m Kevin Ru..‘click’...”

DocBud says:

10:59pm | 13/05/10

Why does the wealth belong to the country, Rick? What have you done to earn your share? As St Margaret of Finchley once observed: “the problem with socialism is you eventually run out of someone else’s money.” The mineral rights should belong to the landowners and nobody else. The tax is pure socialist greed and envy, those who do nothing wanting to cash in on the risk, investment and endeavour of others.