RSPT summary offences
Apparently the polls show that people in favour of the new mining tax are falling for the Government’s single spurious argument about mining companies taking profits offshore and the need to extract a “better deal” for taxpayers from the resources they “own”. These polls show that the reasons given against the new tax are far more varied and some commentators are suggesting that opposition is therefore confused.
May I suggest that, yes, there are many arguments against the new mining tax. And no, there is no confusion.
So here is a summary of the case against the RSPT.
The arguments can be divided into those against the idea, against the design and against the tactics used for its introduction.
CASE AGAINST THE IDEA:
1. The unfairness of Selective Corporate Taxation: Selectively taxing an industry at the peak of its earning potential, during its cyclical upswing, sets a dangerous precedent. Which industry will be next? It will be the most profitable one of course, whatever that may be. Tax should be seen to be fair. Corporate tax should apply evenly to all companies. Tax is too complicated in this country. Most of us were hoping for the Henry Tax Review to make suggestions that simplified our tax law. Different systems for different industries is adding complexity. In addition, it is perverse that we should declare eternal fealty to the concept of free trade and the global level playing field, yet seek to discriminate at home between industries and have one corporate taxation system for mining companies and another for other businesses. Extrapolate this to recognise its absurdity. With the blood of increased corporate tax revenue in the water I don’t trust Kevin Rudd to refrain from creatively mauling another profitable sector. And then another. This could end in a frenzy of new “better deal for the Australian people” taxes. Kevin Rudd is what he is and he cannot deny his nature. He spends, he borrows and he raises taxes.
2. The stupidity of reducing the profitability of our most successful industry: A mining boom caused by Chinese demand during a global financial crisis is a gift we should acknowledge and appreciate. Ken Henry says that the mining boom did not keep us out of recession, but no-one in the entire country believes him. I wish he would keep saying this because it makes him look so much the fool, in addition to the impertinence, impatience and bullying arrogance that is already apparent. His other “pearler” was that even taxing 100% of profit would have no effect on prices! Does this man have any connection with reality? Does he believe everyone else to be an idiot who will accept any stupid comment simply because it has come from his dismissive tongue? His surly and combative tone betrays his understanding that all the informed observers know he is completely partisan and his argument mere deception.
3. The adverse impact on our share market and superannuation: This is of course stating the obvious. Increased tax will result in reduced earnings which will reduce company valuations and share prices will fall. Every Australian’s super will feel that pain. Mr Rudd could help all Australians get a better deal from the mining of Australian resources by facilitating mining company profitability. That way the people get the money. Under Rudd’s plan he gets the money.
4. The blindness to the trashing of our sovereign risk profile: Unsurprisingly the boffins at Treasury and the salivating cabinet were blind to the impact the RSPT would have on the perception of the stability of Australia as a destination for investment capital. If they were not blind to this adverse impact then clearly they just did not care. Markets and managers value stability, certainty and predictability.
5. The shamelessness of this overt tax grab: Clearly it is designed to patch up Rudd’s deficit in a bid to recover lost credibility running up to the next election. The urgency is palpable.
6. The outrageous ease with which this Government continues to damage our economy and sovereign risk profile for political ends: One might even suggest that this represents overt and unforgivable misconduct.
CASE AGAINST THE DESIGN:
7. The ludicrous definition of a super profit: 5.7% is approximately the return one earns from a savings account.
8. The injustice of applying the new tax to existing projects: These projects were modelled and worked up on the basis of a given set of regulatory and financial circumstances. This willingness to tax retrospectively leaves management aghast worldwide.
9. The arbitrary selection of the 40% tax level.
10. The uselessness of the 40% rebate of losses: This is meaningless to companies seeking capital. The bank is not interested. Neither are the companies. As Tom Albanese, Rio Tinto CEO said last weekend, “we plan for success not failure”. I also wonder if the Government realises that they would be synthetically making themselves a counterparty to every junior mining company’s derivative based project financing deal?
11. The greed implicit in the conversion of a State royalty tax into a Federal profits tax that does not flow back to the States, as does the GST.
CASE AGAINST THE TACTICS:
12. The rudeness of imposing radical change with zero preliminary stake-holder consultation.
13. The robust rhetoric impugning the good faith of the mining industry while simultaneously distorting and misrepresenting the facts.
13. The feigned ignorance of the very considerable benefits Australians currently receive from mining companies: Jobs, training, infrastructure development, foreign investment, export profits, Australian re-investment, community development in rural and remote regions, and the very large amount of tax these companies already pay, on a relatively level playing field with all other firms.
14. The hypocrisy of the Government exercising emergency powers to combat media advertising that argues against the proposed legislation.
The Rudd, Swan and Henry arguments for the new mining tax are an insult to our intelligence. The RSPT is not in Australia’s best interest, but it is most definitely in the self interest of the Rudd Government.
The idea of the new mining tax tax highlights this Government’s ignorance. The design highlights this Government’s incompetence and their tactics highlight this Government’s dishonour.
Mr Rudd is now emboldened by desperation and the survival instinct. His decisions are increasingly reckless, risky and unpredictable. His judgement is increasingly absent and his mandate more fragile by the day.
Source Conservative Observations