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Ken Henry Tax Reform

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Terry McCrann
Not so with Rudd's new tax. It assumes China will keep booming and its money will keep pouring into our resources industry.
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And they would not be so silly to know otherwise and propose this profit tax. The Mid West iron ore of W.A is being opened up, the gas/oil business is growing, the Pilbara is expanding. Don't know what's happening elsewhere. Maybe uranium mining will be allowed to expand.

Plenty of opportunities. That outlier is waiting with open arms. :D
 
Calliope said:
The stimulus packages were designed to waste money and in this sense they were a success.

You certainly make some bewildering statements, Calliope.

Why the snide remark?
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Not snide at all (Snide: Derogatory in a malicious, superior way) compared to the 'snide' remarks you continually lob on me and others on this forum.

T'was rather conversational to try to rationalise some of your incongruent critique. Simply, you're sounding like the proverbial 'winger'.

Dare I try to get you to make a 'constructive' comment... what Henry tax reform measures do you think the gov should implement, or not impliment and a brief reason explination would also be good?
 
Whiskers said:
Not snide at all (Snide: Derogatory in a malicious, superior way) compared to the 'snide' remarks you continually lob on me and others on this forum.

T'was rather conversational to try to rationalise some of your incongruent critique. Simply, you're sounding like the proverbial 'winger'.

Dare I try to get you to make a 'constructive' comment... what Henry tax reform measures do you think the gov should implement, or not impliment and a brief reason explination would also be good?
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Sorry. I Know you are being deliberately provocative, but I am not taking the bait. Try to stick to the topic.
 
Wysiwyg said:
Terry McCrann


And they would not be so silly to know otherwise and propose this profit tax. The Mid West iron ore of W.A is being opened up, the gas/oil business is growing, the Pilbara is expanding. Don't know what's happening elsewhere. Maybe uranium mining will be allowed to expand.

Plenty of opportunities. That outlier is waiting with open arms. :D
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Yeah, it seems to me that assuming the gov gets all that they want (worst case scenerio) there is not going to be much change for a couple of years and probably 5 to 10 years before all their proposed measures kick in.

Plenty of money to be made in the mean time.

From a cursory analysis any CEO or director worth their salt could do some restructuring of their budget and or corporate structure in the meantime to mitigate any 'windfall' or 'super' tax and exploit the exploration and development deductions/rebates... ie accelerate the development of new projects.

PS: T'is just a cursory thought, but it may help to level the playing field to stifle conglomerates dominating and enable more competition from emerging producers.
 
trainspotter said:
Mining companies are currently paying around 43 cents in the dollar on profit that they make. This is made up of 30% company tax, land tax, state royalties along with a plethora of other indirect taxes resulting in the magic number. Extraction costs I believe have some tax surrounding them as well?

Under the plan, from July 1, 2012, resources companies will be liable for a 40 per cent tax on profits made from the exploitation of non-renewable resources. Add in all the other taxes mentioned above and Viola ! 57 cents in the dollar GONE to Ming Pong Kuddy and the ATO.
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It would be interesting to know from where the above numbers are sourced and how our overal tax percentages of resources compare with other resourced based economies globally, both current and post RSPT

The following describes how the RSPT will operate and its interaction with state royalties.

http://www.futuretax.gov.au/pages/AFairShareFromOurNaturalResources.aspx

The RSPT will apply a 40 per cent tax to profits from resource projects after allowing for extraction costs and recouping capital investment.

Companies will not pay RSPT until after they provide shareholders with a normal return on capital investments (In relatio to a normal I've seen references to the 10yr bond rate in the mediea in relation to this, currently ~6% or so reported). The generous tax treatment of capital investment under the RSPT, compared with the royalty regimes, will improve the viability of many less immediately profitable mining ventures, boosting investment and jobs in the sector.

So the RSPT will help mining both during set up and during economic downturns.

When resource prices are high, the community will receive a fairer share of the profits.
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If it replaces state royalties then the underlying principal sounds fair to me. The questions though are the minimum rate of return where the RSPT kicks in and then the tax rate to be levied. Fundamentally, they need to be set at rates so the overall tax take is internationally competitive to attract future capital investment. These matters I suspect are ultimately what resource industries and government will haggle.

Should the return threshold for the RSPT be higher given increased risk over 10yr bonds ?

The States will be able to keep their existing royalties, but current State royalty payments will be refunded to companies. Refunding State royalties under the RSPT will remove their economic effect.

Introducing the RSPT, along with refunding State royalties and removing Australian Government resource charges and taxes, is expected to increase GDP in the order of 0.3 per cent in the long run.
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State royalties will be offset against the RSPT so the RSPT is not in addition to state royalties. The approach though is messy and hence closer to a simple tax increase rather than true reform.

What happens when a resource company is liable for more tax under an existing state royalty than they are under the RSPT ?
Do they get a refund on the difference and if so who pays (state or federal) ?

If not, then the (so called) generous tax treatment of capital investment under the RSPT, compared with the royalty regimes, will improve the viability of many less immediately profitable mining ventures, boosting investment and jobs in the sector is a lie for those ventures at least.

How will the refunding of state royalties be managed ?

This should be purely be up to state and federal governments as they are the ones that cannot agree on a single tax. It should not be up to resource companies to file a rebate for state royalties.
 
Herald Sun readers are not impressed;

Results: Henry Review
Thanks for voting!

Will the Henry Review tax changes make you more likely to re-elect Kevin Rudd?
Yes
8.51% (267 votes)
No
91.49% (2870 votes)
Total votes: 3137
 
Calliope said:
Sorry. I Know you are being deliberately provocative, but I am not taking the bait. Try to stick to the topic.
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Indeed I'm setting bait trying to provoke you to give some constructive options/opinions about the topic, ie what you would like changed or not... because without some leadership your eternal criticism is akin to a loose cannon hell bent on blowing things up for the want of blowing things up.

There's an old saying that if you are intent on criticising something, unless you have a better alternative, t'is wise to shut up.

It seems to me, inevetable and consistant with reforms from Keating to Howard, that lower company tax, more deductions and rebates for small business, increased super contributions to name a few would eventuate.

Do you oppose this? Your gereric and persistant criticism suggests you do and would prefer nothing to change or that you want some of those other 'untouchable with a barge pole' recommendations as it was put, to be implemented.
 
After looking at all the pros and cons on this matter I am in favour of the resource tax. What needs to be born in mind is the foreign ownership of a very large percentage of our resource companies. This ownership increased dramatically over recent years at very low prices. I look at this tax as going some of the way to reclaiming back some of the farm.

If these companies facing the cost of the tax were basically Australian owned my view would be different. They aren't.:)
 
vincent191 said:
I think the mining sector has over reacted. The proposed tax reforms are by no means a foregone conclusion. It still has to be agreed by the States and then go through both houses of parliament and the senate.
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In addition, Wayne Swan indicated in a Radio National interview this morning that the 40% was more or less nominal at this stage and that he expected some 'consultation' with the mining companies.
 
The States will be able to keep their existing royalties, but current State royalty payments will be refunded to companies. Refunding State royalties under the RSPT will remove their economic effect.
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I'm probably being dumb, but how does this tie up with the Qld Treasurer this morning saying they were in favour of the change as it would not affect Queensland's royalties?
 
Julia said:
In addition, Wayne Swan indicated in a Radio National interview this morning that the 40% was more or less nominal at this stage and that he expected some 'consultation' with the mining companies.
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I suspect the return on investment threshold is in the same boat.

Resource companies are screaming "throat cut" as their opening shot in negotiations. Ultimately the rate will be less or their may be a timed increase to 40% and/or increased return threshold. Politically the government will sell this as a positive and will be looking to reach agreement before the election. It will be interesting to see how much slack their is between their current suggestion and the final outcome. Tony Abbott needs to be careful not to paint himself into a corner from the outset.

A fundamental problem with a resources super profit tax (or any super profit tax) is that it will be highly volatile. Goverments will want to be cautious when considering how much of it to squirrel away in good times.
 
Ian Huntley's view of the government's response to Henry.
Henry: what a sick joke
Ian Huntley | 03 May 2010 | | | Increase | Decrease

Page 1 of 1

My initial take on the government's "root and branch" tax reform is that:

(a) The prime minister, who admitted in March that he had not read Henry, still hasn't, and

(b) that Dr Henry himself should be seriously considering resigning as he appears to have wasted an awful lot of serious effort.

Henry recommended the resource rent tax (RRT) be implemented with recognition of state royalties, which it now does. Today, BHP (BHP) issued a statement clearly outlining the taxes it pays, and hopefully suggesting that discussion of details may lead to a better outcome. To be exact, the BHP statement says the RRT will increase Australian-based taxation from “around 43 per cent currently to 57 per cent from 2013.”

The tax particularly hits mature, profit-generating miners such as BHP and Rio Tinto (RIO). Goody goody gumdrops for the explorers and those in the heavy duty development stage, who appear at first blush to have gained some wins. But the RRT looks like it takes away a lot of the aim of the game - the generation of profits commensurate with the risks involved.

I would continue to hold mining stocks, BHP and Rio in particular, as there is a lot of water to go under the bridge on this issue yet.

Again, the Rudd spin makes a gentleman leaving the pub at midnight look good. Hey - we are trying to adjust for the two-speed economy, say the spin doctors. But this tax threatens to bring the economy back to slow speed, gutting the golden goose.

The "two-speed" issue was firstly based on the growth generated by the mining industry and secondly focused on some of the harsher issues, but on balance argued that it was good overall for the country.

Given our top three exports are resources, that is stating the bleeding obvious. And they got there by exceptional risk taking, at times kicking ill-conceived government policies - like keeping the iron for future generations - and through some excellent management.

Lifting super concessions down the track is Australian Council of Trade Unions (ACTU) policy and was not mentioned by Henry. It simply means the workforce gets that much less take home pay as it is the total employment cost that drives business - the superannuation contribution is not some bonus. Super has some very good benefits too, some I emphasised during the global financial crisis. But much of the applause is coming from those who benefit from managing the larger pie.

Henry suggested a 25 per cent company tax. Some time down the track in this package - hurray hurray - a 2 per cent cut to 28 per cent has been suggested. I would laugh if it wasn't such a sick joke. The bottom line has many parts including the various ways depreciation and amortisation are treated for the purpose of actual taxation payments, as against international financial reporting standards (IFRS).

It also means the government is relying far too heavily on a resources boom to bolster its revenues and resources are very tricky beasts historically. As a good farmer aims to develop, the government needs to further diversify its revenue streams - something Henry was guiding towards, though in some preposterous manners.

The budget will show where the real problems are. What is this government planning for its expenditures, and will it then release its forecasts as required, which was not done at the weekend?

My personal view is that Tony Abbott, foot in mouth and all, looks better each day.
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noco said:
Firstly, Rudd has only selected 3 out of 138 reforms set up by Henry at a cost of $10million over 18 months.

* Rudd chickened out out on 'land tax on the family home'.
* Rudd chickened out on 'the fuel excise tax'.
* Rudd chickened out on 'the congestion tax'.
Just to name a few.
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Your 'chickened out' comment seems to suggest you think Rudd should have adopted these!?

Clarify please, do you think Rudd should adopt these!?
 
The principal prespective from which the goverment has considered the Henry Review is it's own survival at the next election.
 
Tax Reform? I don't think so.

After two years in the making and after sitting on the thing for almost 5 months we finally have the Rudd Government response to the Henry Review: tax the hell out of mining companies.

The Rudd Government’s revolutionary proposal following the release of the Henry Tax Review yesterday is pretty astounding in its lack of vision.

It’s not so much a “root and branch” overhaul of the tax system as it is a rocks and dirt one.

This is not to say that the idea to place a 40 per cent tax on some mining company projects to fund Super changes and company tax breaks is a bad idea, but why did we need an entire tax review to do this?

Kevin Rudd had painted this review as the panacea for structural problems within Australia’s tax system, but his response looks more like budget leaks in an election year.

Its release only months before an election and only a week before a budget means that the waters around this thing have been muddied beyond all recognition.
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http://www.thepunch.com.au/articles/no-hooray-for-henry/
 
nioka said:
After looking at all the pros and cons on this matter I am in favour of the resource tax. What needs to be born in mind is the foreign ownership of a very large percentage of our resource companies. This ownership increased dramatically over recent years at very low prices. I look at this tax as going some of the way to reclaiming back some of the farm.

If these companies facing the cost of the tax were basically Australian owned my view would be different. They aren't.:)
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My cursory opinion tends to agree, this is a pertinent point.

There is a lot of noise from big 'international' players like BHP which are largely foreign owned now, to not change the status quo, and a lot of political rethoric and rabble rousing ( watch them come out of the wood work), but at the end of the day there a lot of changes proposed all the way across the economic enviornment and it'll take some time for miners to consider and adjust to the proposed changing dynamics.

Also, I'm seeing a lot of critique without reference to the macro economic position and likely developments around the world as these changes are due to activate. The most essential being Aus's very low relative national debt especially compared to our main mineral competitors.

The implication is that once these other countries mineral economy has developed to a 'golden goose' stage, as it is put, that these other countries will need to capitalise at least as hard if not more because of their higher national debt.

This has me considering the often used motor racing cliche, tis often better to pit-stop a lap or two before your oponents, ie to change tyres and fuel up to get better field position for later in the race.
 
BHP is 40% foreign owned and Rio Tinto is 70% give or take a point or two.

They have contributed the most to the Govt coffers. Why tax them out of being competitive?

BHP chief executive Marius Kloppers said the proposal would hurt the sector’s competitiveness.

“If implemented, these proposals seriously threaten Australia’s competitiveness, jeopardise future investments and will adversely impact the future wealth and standard of living of all Australians,” Mr Kloppers said.

http://www.businessspectator.com.au...ces-tax-pd20100502-53B3N?OpenDocument&src=tnb

Meanwhile, Rio Tinto managing director Australia David Peever said the miner was concerned at the "apparently arbitrary way" in which the new tax had been set at 40 per cent.

"Taxing 40 per cent of profits over the long-term bond rate, together with corporation tax, would make the Australian minerals sector the highest taxed in the world, seriously eroding competitiveness," Mr Peever said.
:banghead:
 

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