Resource Super Profits Tax thingo whatsit

[Road_Warrior]

All I'm seeing and hearing with all the media circlejerking about this subject is emotive arguments. It's pretty hard for an ordinary person to gain a reasoned understanding of the pros and cons of the proposal with all this going on.

Consequently I know nothing and I'd like to know more. The Government's fact sheet on it is here:

http://www.futuretax.gov.au/document..._Tax_Final.pdf

Australia has abundant non‐renewable resources, which are expected to continue to command high prices, primarily driven by strong demand from China and India.

The community, through the Australian and State governments, owns Australian’s non‐renewable resources and charges private firms to exploit those resources through a large range of charging regimes involving royalties and taxes.

Current resource charging arrangements provide an inadequate return to the community and do not recognise the cost of resource investment and production, which can be particularly important during periods of low resource prices. Royalties are quite unresponsive to changes in resource profits, and the community has largely missed out on sharing in the vast wealth generated from the sale of Australia’s non‐renewable resources.

The RSPT will yield a return to the community as a share of resource profits that is more comparable to early 2000s, before the last mining boom. It will provide a more efficient mechanism for collecting a share of the returns to the community and remove impediments to mining investment and production.

Here is a fact sheet from the Mining Council of Australia:

http://www.minerals.org.au/__data/as...nd%20facts.pdf

The Government says mining doesn’t pay its fair share

Mining paid $80 billion in tax over the last decade


Mining pays a higher effective tax rate than any other industry

Mining paid eight times more tax last year than a decade ago

I would quote some more of the text in here but it went all munted when I tried to copy it.

So what is the deal? Has anyone cut through the crap and worked out whether or not this will be good or bad for Australia? Discuss.

[BHDOGS]

Im all for it sure the mining company's might of paid that much tax in the past decade but id like to know how much profit they've made in the past decade to there resources you can only use them once we should charge a fair amount for them even if it drives a few mining company's of sure so what in 10 years time the stuff they haven't dug up will be worth 100 times more so they will come back anyway.

[Steve11]

The mining companies have been sucking the natural resources out of Australia for years but no one has stopped them because they have paid huge amounts in royalties and tax.
The current government wants to suck off more from huge profits because they cannot control their budget and the farming and manufacturing industries are totally stuffed.

It sounds OK but they do not make it fair, what about the banks and other finance sectors who make huge profits by screwing you and me in our bank fees and morgages?

If KRudd and Co are serious then they need to make it fair across all industries and not just mining.

At the end of the day all the resources belong to all Australians and not just the mining sector or the elected government of the day.

How about a political party that wants to look after us and not the vocal minority or the heavy weights?

Sorry for the sad but living in Perth you really get sick of the obvious politics.

The real problem is that after you vote for that energetic, conscientious, honest politician, you end up with a lying, dishonest, party hack that is only interested in themselves and their pension.

I hate politics.

[SVD]

if i remember correctly, one of the trade offs for the higher tax was that the government would also become an investor in the mine(s) so that parts of the setup costs etc...would be covered by the gov, also if the mine was a failure the gov would also loose investment...

there's more to it, but i cbf typing it now, most likely tomorrow i'll add more...
it's not a bad scheme but very unbalanced and like the guy above me said, it needs to be accountable to more then just the miners.

[StAndArdAU]

Lets keep this about the Tax and not about the goverment itself.

Any mining company that threatens to pull its operations out of Australia is just bluffing. and the ones that are, are all the smaller operations.

At the end of the day it will all go back to normal and you and i wont be effected at all.

[Serial_Fool]

Meh, doesn't seem logical to be putting this tax on during turbulent financial times.

We need to stimulate growth, not supress it because KRUDD spent too much of his pocket money too soon.

[banarcus]

It's to prevent a two speed economy by penalising boom states such as Western Australia and Queensland.

[aye you]

i think from memory, that if the bill is passed, the mining industry in this country will end up paying something along the line of 53% prift tax, meaning that more tha half of everything they make will go to the government.

How is this bad?

Would you want to invest in a resources project in this country if your going to have to give more than half away? Or would you look over seas?

How many jobs, local jobs, are going to be lost (before they are even created) by companies cancelling current and future projects.

The biggest issue I have with the super tax is that the latest federal budget has been written completly around this tax getting through parliment. The government have already spent the cash that they think they will get from this tax. So what happens to our economy when the tax gets knocked back in parliment and the federal government have NO money left? the last resort will be the increase in tax on the rest of us...sounds familiar.....

[gtfpv]

listening to talk back radio all i here is putdowns about the tax proposal. however hearing billionairs printing limitless money out of our resources whinging about tax is kind of insulting and greedy on the other hand . i think most profit from resources should go to australians . not companies . as long as the companies mining still have wealthy profits . thats my opinion . i do think naturally rich big hitters will always whinge about taxes .

[gtfpv]

Originally Posted by aye you

i think from memory, that if the bill is passed, the mining industry in this country will end up paying something along the line of 53% prift tax, meaning that more tha half of everything they make will go to the government.

How is this bad?

Would you want to invest in a resources project in this country if your going to have to give more than half away? Or would you look over seas?

How many jobs, local jobs, are going to be lost (before they are even created) by companies cancelling current and future projects.

The biggest issue I have with the super tax is that the latest federal budget has been written completly around this tax getting through parliment. The government have already spent the cash that they think they will get from this tax. So what happens to our economy when the tax gets knocked back in parliment and the federal government have NO money left? the last resort will be the increase in tax on the rest of us...sounds familiar.....

i look at it this way too , they are taking something that isnt thiers and printing money out of it . the share they get should be reasonably proportional ( thats the big question. ) if i sold my neighbours oranges and achieved a 10% net profit after taxes that wouldnt be such a bad thing . especially if i supplied the world with oranges out of it .

[naddis01]

Originally Posted by gtfpv

i think most profit from resources should go to australians . not companies.

What investments does your super have?

By the way is your 'shift' key broken?

[JPFS1]

very complex issue. There are pro's and con's definitely.

Of course the miners will cry til they're black and blue and threaten all sorts of action, that's expected. Their projects won't be AS profitable, lower returns to shareholders/investors etc.

This additional tax when taking all things into account (standard company tax rate + offsets etc) equates to about 57% in real terms. But you have to consider that the miners have not been paying the 30-33% company tax rate. There are reports hat suggest that they pay anything between 10-20%.

So we currently have a PRRT (a royalty to the state governments) which is based on production VOLUME. Important point. Regardless of size of company, regardless of profitability etc, they must pay PRRT. So this can be very difficult for upcoming mining companies, particularly those that are transforming from explorers to producers which almost always have extremely high capital expenditures, low or no profits at that stage, and potentially for some years, yet they must pay PRRT which is not consistent across the States as the States can negotiate their own terms.

So a big tick for the new scheme for the small to medium up and comers. Why? because the new system is based on PROFITS. So it gives these companies with new projects a much better chance of success (from a fiscal point of view) with their ventures. They will only pay the tax when the project becomes profitable. This is where we may see the increased investment that the pollies are talking about??

Must also note that the scheme allows 40% of losses to be claimed.

There are several other tax benefits if this scheme is accepted which I'm sure is outlined in the linked pages above.

I can think of some more positives, but here's some potential negatives.

The Sovereign Risk profile for investing in the Australia's mining industry from overseas players suddenly increases. When they see more TAX, they have to look at their interests and do the numbers again.

Mining is an extremely HIGH RISK industry. The industry expects that it deserves HIGH returns, so they do not want their profits, return to JV's, shareholders etc, diluted by another tax. Mining REVENUES can be VERY high, but so are Capital and Development Exp. but with relatively low yields/profits.

So to sum up, I think there is room for tax reform for the industry. Perhaps it's not the right time considering the world economy is tredding on egg shells again, and maybe some tweaking of the scheme, but overall I think it's a move that can work providing it's implemented correctly.

[SpoolMan]

If we can keep the discussion is centered around the the tax the thread will go fine, should we end up talking purely about politics thread will be closed.

[The Lone Ranger]

So, the Government is happy to take a loss on any venture at a rate of 40%, yeah? I was reading somewhere last week that in the last 10 years some mining ventures have lost a combined 10 billion dollars. I wonder how the Australian public will react when they realise that we have to put our hand in our pockets for the 4 billion dollars.....something is not quite right here. Also, is there another downside to this for us in the way of the cost of living. Will things cost more as a result of this? Power in particular has incresed by some 50% in Queensland in the last 4 years.

[Road_Warrior]

Originally Posted by ENIAL8

So, the Government is happy to take a loss on any venture at a rate of 40%, yeah? I was reading somewhere last week that in the last 10 years some mining ventures have lost a combined 10 billion dollars. I wonder how the Australian public will react when they realise that we have to put our hand in our pockets for the 4 billion dollars.....something is not quite right here. Also, is there another downside to this for us in the way of the cost of living. Will things cost more as a result of this? Power in particular has incresed by some 50% in Queensland in the last 4 years.

That's interesting...and a pretty reckless policy position if that is the case. Surely that can't be right?

[Jastel]

Look at what has happened to the A$ and the stock market since it was announced....

[JPFS1]

Originally Posted by Jastel

Look at what has happened to the A$ and the stock market since it was announced....

Look at what the world markets and the Euro have done.

Nothing to with this policy.

Yes there would be share price drops that are negatively impacted because of this, but the main driver of the sell off is mentioned in the first line.

[drew`SEVNT5]

I think they need to raise the level from where they start taxing... if I understand correctly, its at 6% profit and above...

Which is what you will get sticking your money in the bank... with a whole lot less risk!

So, whos gunna pump the investment into Mining then? Push the threshold up to 10-12%...

[irish2]

Originally Posted by Steve11

The mining companies have been sucking the natural resources out of Australia for years but no one has stopped them because they have paid huge amounts in royalties and tax.
The current government wants to suck off more from huge profits because they cannot control their budget and the farming and manufacturing industries are totally stuffed.

It sounds OK but they do not make it fair, what about the banks and other finance sectors who make huge profits by screwing you and me in our bank fees and morgages?

If KRudd and Co are serious then they need to make it fair across all industries and not just mining.

At the end of the day all the resources belong to all Australians and not just the mining sector or the elected government of the day.

How about a political party that wants to look after us and not the vocal minority or the heavy weights?

Sorry for the sad but living in Perth you really get sick of the obvious politics.

The real problem is that after you vote for that energetic, conscientious, honest politician, you end up with a lying, dishonest, party hack that is only interested in themselves and their pension.

I hate politics.

If you tax other industries such as banks at higer rates they will just pass on the cost to consumers. Miners can not do this as the ores they remove are a global commodity, and are therefore priced on supply and demand on a world stage.

[irish2]

Originally Posted by drew`SEVNT5

I think they need to raise the level from where they start taxing... if I understand correctly, its at 6% profit and above...

Which is what you will get sticking your money in the bank... with a whole lot less risk!

So, whos gunna pump the investment into Mining then? Push the threshold up to 10-12%...

It is 6% of profit above total turnover. Mining has a massive turnover before a profit is seen so a 6% profit is usually in the billions.

[irish2]

Originally Posted by Jastel

Look at what has happened to the A$ and the stock market since it was announced....

The mining sector has performed better than all other sectors on the stock market in the last month. What is your point?

[irish2]

Originally Posted by ENIAL8

So, the Government is happy to take a loss on any venture at a rate of 40%, yeah? I was reading somewhere last week that in the last 10 years some mining ventures have lost a combined 10 billion dollars. I wonder how the Australian public will react when they realise that we have to put our hand in our pockets for the 4 billion dollars.....something is not quite right here. Also, is there another downside to this for us in the way of the cost of living. Will things cost more as a result of this? Power in particular has incresed by some 50% in Queensland in the last 4 years.

The mining companies are still owned by shareholders who demand they make a profit. If they pursue a dead end pointlessly they still make a loss reguardless of government involvement. Each shareholder has a vote at board meetings and after a solid loss I'm sure the sitting board would look very different after the meeting.

On the issue of power could the cost increase be because of the increasing demand on the network? The population in South East Queensland has boomed and average household demand has increased. Where do you think the power lines, substations, and power stations come from? These things cost money.

[JazManXII]

wouldnt taxing them more lower there profits which would lower there profits which would lower there share price and seeing as mining companies are a major player in the ASX 200 which would negativly effect the aussie dollar.

[irish2]

Originally Posted by JazManXII

wouldnt taxing them more lower there profits which would lower there profits which would lower there share price and seeing as mining companies are a major player in the ASX 200 which would negativly effect the aussie dollar.

Aussie dollar is more reactionary to interest rate changes. The higher the rate the higher the dollar (compared to the world). The Mining companies OUTPERFORMED all other sectors in the last month on the stock exchange. What is the problem?

[Jastel]

Yes the whole world share markets and currencies are going down but the A$ and our exchange were doing better BEFORE the govt announced this new tax

How much higher would mining shares be now if there was NO announcement

If you think it is such a good idea then lets increase everyones taxes by 40%

Oh hang on that wont get votes will it...

[irish2]

Originally Posted by Jastel

Yes the whole world share markets and currencies are going down but the A$ and our exchange were doing better BEFORE the govt announced this new tax

How much higher would mining shares be now if there was NO announcement

If you think it is such a good idea then lets increase everyones taxes by 40%

Oh hang on that wont get votes will it...

I don't think you understand. The whole share market is down. The world markets are down. The mining sector has done better than the rest of the share market. We don't remove non renewable resources to make our money. The Aussie dollar being down is good for local production and farmers.

We aren't talking about profits like the CBA of $2 billion. We are looking at guys like Clive Palmer making $8.5 billion in one year. That is just his money his company made more!

[ltd]

It's certainly a very emotive issue so here's a couple of facts for the everyday punter.

* The tax would effectively see Australia as the highest taxing and therefore most expensive mining country in the world. This simply means that our resources become more expensive, and the worlds users of minerals would simply buy elsewhere.

* If the increase in cigarettes was to stop people smooking; what does the government think an increase on mining tax will do?

* The superannuation of every Australian has shares in mining companies; ABS figures project that since the inception of this new super tax, the average superannuation balance has fallen a whopping 20-30% and the tax hasn't even passed the senate yet. This affects every one of you.

* The mining sector kept our economy out of recession, why kill it?

* The resources do not belong to Australians, they belong to the states. As such, the miners pay huge royalties to the states to ostensibly purchase the minerals and then they themselves spend money removing them from the ground. What the federal government is saying to curry favour is ostensibly a lie, as it would take a constitutional re-write to allow royalties to be paid to the federal government as well.

* This is not about super profits, it's about scale. After licences are purchased, leases paid for, royalties are paid, capital costs are paid and then company taxes are paid; the leftover is profit. After paying over 40% of all revenues in taxes and levies then to pay equipment costs as well as salaries and allowances, the profit on most of these companies lies in the range of 10-20%. Sounds little but due to the scale of the projects, the profits in dollar terms sounds huge.

* Last year alone BHP spent 4 billion on a mine that didn't yield, and later sold it for 400 million - one tenth of its setup cost. This would mean on this alone taxpayers would have to foot a further 3.6 billion to cover the losses of this one project.

* Rio and BHP lost over 8 billion collectively on the first day this was announced.

Sorry, but this is not thought out policy, it is an electioneering stunt bringing on class war and it is fraudulent to say the least. The government relied upon taxation figures produced by a university student in the united states of america (17%) as opposed to even treasury figures (36-42%) for the level of taxation.

[JPFS1]

Great post ltd and I agree with most of that.

I certainly think tax reform in the industry can be successful providing there is comprehensive consultation process with all involved. People tend to think only of the miners, but the mining services industry is greatly affected, even more so than the miners themselves.

I think we will see a back flip on this soon and a more thorough process involving the industry to gain some credibility on the policy.

[anto]

for a very sensible and thoughtful explanation, see LTD's post above.

[DJR-351]

More Rep to LTD.....