Now I don't pretend to know much about the Resource Rent Tax that the Rudd government has ambushed the Mining Industry with and I'd be very surprised if anyone reading this does. It's such a convoluted tax system that only a person with a triple Masters degree in bullshit will ever understand it and the general electorate will never be able to and this smacks the face of the government who have for years been trying to "simplify" the tax system by engaging Treasury's Ken Henry to study ways to do it.
The simple explanation of the Resources Rent Tax is that the government is lifting the effective tax of the companies because they are making too much money, according to the government. They cite extraordinary prices in resources and the great demand from China above what the mining industry are traditionally used to. The government argues that the minerals in the ground belong to the Australian people and they should be compensated accordingly by the mining companies. Conversely as I understand it, if the mining companies lose money the Commonwealth government will pay the miners back for their losses.
Now I hope the above explanantion is simple enough for you to understand because unfortunately that's all I can gather from days and days of listening to our esteemed politicians argue over it on the airwaves and in the newspapers. We hear mining company bosses saying they'll need to review their investments in Australia and may have to move them to other countries where the tax implications are not as disadvantageous as in Australia. The government on the other hand have dismissed the miner's grouses as having one thing in common "not wanting to pay more taxes" so says Kevin Rudd in parliament yesterday. My goodness, such simplistic analsyis from what I understand to be an intelligent man.
What we have to understand is that the mining companies take huge risks to make huge profits for their shareholders. If you don't believe me, go back in time and try to find the financial page from the financial times from 20 years ago. I'll bet my bottom dollar that no less than 30% of the mining companies listed in 1990 are no longer in existence. Gone from the face of the earth or more likely gone under. They invest huge sums of money and the huge profits are not guaranteed. They have to get the relevant permits, invest in expensive machinery, hire geologists, engineers, labourers and many other skilled and semi skilled resources just to see the project take off the ground. They need to build infrastrucure like rails, ports and accommodation camps to facilitate their mine sites. They create employment not only for the people who work directly for them but also for the support industries like restaurants, shops, cinemas and brothels (dare I say) etc. They need to sell their resources to someone who is willing to buy it at a price that will make their venture worthwhile. The government then takes a royalty from the money made from crown land and finally they get taxed at the company tax rate. Now the government is saying we want to tax them more because they make too much money and the resources belong to the people of Australia.
The simple explanation of the Resources Rent Tax is that the government is lifting the effective tax of the companies because they are making too much money, according to the government. They cite extraordinary prices in resources and the great demand from China above what the mining industry are traditionally used to. The government argues that the minerals in the ground belong to the Australian people and they should be compensated accordingly by the mining companies. Conversely as I understand it, if the mining companies lose money the Commonwealth government will pay the miners back for their losses.
Now I hope the above explanantion is simple enough for you to understand because unfortunately that's all I can gather from days and days of listening to our esteemed politicians argue over it on the airwaves and in the newspapers. We hear mining company bosses saying they'll need to review their investments in Australia and may have to move them to other countries where the tax implications are not as disadvantageous as in Australia. The government on the other hand have dismissed the miner's grouses as having one thing in common "not wanting to pay more taxes" so says Kevin Rudd in parliament yesterday. My goodness, such simplistic analsyis from what I understand to be an intelligent man.
What we have to understand is that the mining companies take huge risks to make huge profits for their shareholders. If you don't believe me, go back in time and try to find the financial page from the financial times from 20 years ago. I'll bet my bottom dollar that no less than 30% of the mining companies listed in 1990 are no longer in existence. Gone from the face of the earth or more likely gone under. They invest huge sums of money and the huge profits are not guaranteed. They have to get the relevant permits, invest in expensive machinery, hire geologists, engineers, labourers and many other skilled and semi skilled resources just to see the project take off the ground. They need to build infrastrucure like rails, ports and accommodation camps to facilitate their mine sites. They create employment not only for the people who work directly for them but also for the support industries like restaurants, shops, cinemas and brothels (dare I say) etc. They need to sell their resources to someone who is willing to buy it at a price that will make their venture worthwhile. The government then takes a royalty from the money made from crown land and finally they get taxed at the company tax rate. Now the government is saying we want to tax them more because they make too much money and the resources belong to the people of Australia.
Let me ask you if the government gave you the resources in the Pilbarra, what would it be worth to you? Nothing!! Just some sand and debris as you would need to know where to find the resources, you'll need machines to dig and transport the resources and you'll need someone to buy it from you, then only would it be worth something to you, otherwise it is worth jack shit and the government's argument that the minerals belong to the Australian people is no more than a big fat government spin.
On the surface, it doesn't sound so bad if you were not in the mining industry. Sure, spread the wealth around, we may even have less workers heading up north putting halt to the skills shortage the city is facing. Ok, you may argue that some of these people working in the mines earn ridiculous money and you won't be too far wrong. The minimum skilled wage in the new Gorgon project is reportedly $160,000 p.a. Ok you may argue that is a bit much and I'd tend to agree with you as the average wage in Australia is only between $55k - $60k but what you need to understand is that these people who work up north are highly skilled and the work they do require years of experience, precision and knowledge. Doing their job right or wrong could mean the difference between a mine blowing up, machine crushing a man or not. If you over cook your burger, you just throw it away, no biggie (ok I might get in trouble now by making fun of a Mc Donald's worker but don't everyone do that as well?).
On the surface you could also argue that putting the mining profits back into the community ain't so bad after all. As the government says, if it's the people's resources then the people should enjoy the benefit.....sounds plausible until you realise it's the government talking and it's utter fantastico spin like the mother of all spins. You're not going to see this money! They deficit created by the government will receive the first cheque from the mining companies. The industry that kept Australia out of the last recession will have to pay for all the economic mismangement of the government. The wasted money on the pink bats scheme, the wasted money on the government school halls, the cash hand outs to dead people and the list goes on. They talk about upgrading infrastructure etc. but I'm not buying it. The increase tax will be used to pay off debts and to fuel the Rudd government's insatiable appetite to spend. Rudd doesn't know what a profit means. He's a beaurecrat. He's given a budget and he needs to spend all of it before the year is up and that's how he's judged as to whether he's done his job well or not. He's seen to have done his job if he spends all the money he's given. Ask him to define a profit and I bet you he'll struggle.
Let's not kid ourselves. The mining stocks have tunbled, the Australian dollar has tumbled and there is widespread discourse in the mining industry due to this 'super profit tax', If someone could explain to me what a super profit means I would be so greatful as I must have had thick wax in my ears when I heard the government explain that it was anything over the long term bond rate of 6%!!! Why would you risk all that capital to go into the high risk mining venture only to be slugged a big huge fat tax bill when you can safely invest that in long term bonds with effectively no risk at all?? Boggles the mind.
When an industry has saved you from the last recession and has been your cash cow for the last few decades, why would you sabotage it? WHY?? Would the companies pulling out of Australia due to this 'super profit tax' negate the increase in taxes? You bet it would.
Other articles:
No comments:
Post a Comment