Lotteries have been described as a stupidity tax levied on an innumerate population. Mr Rudd’s proposed Resources Super Profits Tax (RSPT) is also a stupidity tax. It will punitively tax mining corporations foolish enough to operate in Australia under a rapacious, ignorant and unpredictable regime.
Miners represent around 30% of the companies on the ASX and 20% by market cap. Mining accounts for 5.6% of our GDP and 35% of our exports. Mining is an industrial sector in which Australia truly excels but Mr Rudd’s new tax will turn mining profitability itself into a lottery.
Previously I have been sufficiently non-partisan to at least acknowledge intelligence on the Labor side. I am now happy to set down that heavy load and move on. This new super tax on mining is the singularly most insane and quite frankly stupid political proposal I have heard in my life. Even the mine workers don’t want it. You would think that would get Mr Rudd’s attention. Lamentably it does not.
Lindsay Tanner attempted to defend it on Q&A arguing that the resources in the ground belong to the Australian people and can only be sold once.
I have a news flash for Lindsay Tanner and the other geniuses in the ALP. The metals and minerals in the ground are owned by the mining companies. They buy the leases on the tenements for exploration, purchase the properties and then pay State Governments a royalty to recompense the Australian people appropriately. Remember that the Australian people do nothing for this royalty reward, and are already rewarded with job creation, foreign investment and export capital flowing into our economy, and the huge amount of corporate tax the companies already pay. The companies have done the exploration, the building and running of the mines and the marketing and selling of the product. All of these are very high risk business activities. Exploration is a massive risk for investment capital. Mines are extremely difficult beasts to run and the commodity markets are very tough indeed.
This new 40% tax on profit above the risk-free rate (currently 5.7%) is outrageous. This tax also applies before debt financing is accounted for, making this more a tax on revenue than profit. More than outrageous, this is scandalous. The second half of the proposal entails the taxpayer guaranteeing 40% of any losses made by mining companies. As a taxpayer I object to that and the companies don’t want it either. They are happy to take their own risks, pay corporate tax the same as every other business and keep their hard-earned profit for their shareholders and our super funds.
Lindsay Tanner may think the resources in the Australian dirt can only be sold once, but the mining companies now have to buy them twice.
Mining companies became progressively less profitable between 1980 and 1999 during a long commodity bear market. Commodities have been in a bull cycle for the past ten years and many believe this could last another 10 to 15 years. Now that the planets are aligned for mining companies to make money, the Labor Government is seeking to massively and selectively tax them.
Who will be next? Which industrial sector will be the next to start doing well, and by doing so move into the Labor gun-sights for special taxation?
This Government should be doing all it can to encourage foreign investment in Australia. This new tax will repel investment capital.
This Government should be doing all it can to minimise the corporate tax burden. This new tax maximises the tax burden.
This Government has revealed itself many times as ardently hard left but wrapped in a protective cloak of faux economic conservatism. This new tax rips that cloak away, exposing the pugnacious ignorance and economic vandalism beneath.
Gough Whitlam’s meddling with foreign mining investment in Australia caused an exodus of corporations and capital in the 1970s. Here we have another homage to Mr Whitlam from Mr Rudd.
Heaven help us.
Source Conservative Observations