Ken Henry Tax Reform

Rudd's supporters try to convince themselves that whacking the big miners and the smokers were courageous decisions. From an electoral point it takes no courage at all to attack two unpopular minorities and is just another example of his gutlessness.

The smokers cannot fight back, but the big miners are obliged to try to defend their shareholders.

Attacking unpopular minority groups has long been a favoured ploy of dictators. It helps to keep the masses distracted from the really nasty bits.

He will release a few sweeteners before the election, a few nasties after the ejection but most recommendations (like the health reform package) will disappear into the "way down the track" basket

Whiskers said:

Hardly using your posts as a soap box! Not near sound enough for me to stand on! :

In fact all I did was highlight to your cohort noco, that even you recalled that what he was being so critical of me as hearsay, was in fact part of the gov speech.

Coming from one of the most animated posters on the forum...

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I reiterate Whiskers ..... if you are going to post your beliefs and opinions without any FACTS ie links to the subject matter at hand rather than wishy washy inuendo then you deserve the sabre rattling you are experiencing at the moment. If it was a Govt speech then repeat verbatim with corresponding accuracies please. Likewise your posts in regards to WA alleged corruption in the mining industry. FMG taking BHP to court to use a railway line that actually did not belong to FMG is hardly "corrupt" as you put it, now is it? Have not seen any supporting evidence in regards to Govt and mining companies calluding on tenements either of late? Maybe in the 1980's during WA Inc and such but those days are long gone now aren't they ?

I do enjoy the way you have this tremendous thick hide and have the ability to brush off and dismiss all rational thought process's, then change the spotlight away from the crux of the discussion and turn it around by throwing out a strawman argument. It is very Laboresque in it's design and you must have practiced this in the mirror at home for many hours to perfect this technique. Or has Kevin Rudd produced a coaching manual for the proletariat these days?

This Henry Tax Report will go a long way of taking the wind out of the sails of this Govt as the people and media are now starting to pick up on the untruths of a policy on the run, zealous overspending, tax grabbing, pontificating and hopelessly out of it's depth Government. Like I have posted previously "Economic Policy prior to Fiscal Responsibility is like placing the cart before the horse."

Mofra said:

3/138 is a little bit of a misnomer.

Rudd is a popularist style politician, in that the polls are more important than getting the right thing done at the right time. I have no doubt that there are more reforms that he may perceive as unpopular that he will include in the first post-election budget, should he be re-elected.

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Absolutely agree.

Bushman said:

Maybe they should consider a 'land rent tax' for super profits earned on the family homes?

This tax gain could be used to fund housing affordability solutions.

That way all generations will share in the unpredented housing boom.

Oh i forgot that any tax reform for middle Australia is deeply frowned upon

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That is one area I'm seriously hoping they don't go near.

The family home should be sacrosanct in terms of creating wealth for the average 'working family'.

However foreign Land Banking is one issue that I'm pleased has seen a policy reversal to force non residents to sell on leaving the country.

Also, the eternal issue of Negative Gearing (which I generally like and have used) hasn't got much mention yet. That's one that may come after an election.

trainspotter said:

I reiterate Whiskers .....

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lol... so you recognise that I am higher up the food chain than you.

Chips are there to be devoured. Have to watch I don't get to fat (cocky) on the easy pickins though. lol

Sorry mate, couldn't resist that one. It was too easy. :

I think you need to get out more whiskers.

There is a webcast tomorrow on the Henry tax review through Business Spectator for those who are interested, here`s the link

http://webcast.viostream.com/?viocast=2526&auth=e4032bf3-49b1-4ab6-9fd5-877a9fef2958

Whiskers said:

That is one area I'm seriously hoping they don't go near.

The family home should be sacrosanct in terms of creating wealth for the average 'working family'.

However foreign Land Banking is one issue that I'm pleased has seen a policy reversal to force non residents to sell on leaving the country.

Also, the eternal issue of Negative Gearing (which I generally like and have used) hasn't got much mention yet. That's one that may come after an election.

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My comment was more 'tongue in cheek' and taking the mickey out of the term 'super profits'. A previous posters comments about banking 'super profits' was on the money. Mac Bank also posted a 'super profit'.

For the record though, I cannot see why the family home should be 'sacrosanct' re tax reform.

Back to the resource 'rent tax' and Krudd, for him to attack BHP as being 'foreign owned' will go down as the biggest piece of political spin I have read for a long, long time.

The most outrageous part of this is the diabolical spending record of this government. If the infrastructure spending they are proposing will be via a PPP then I might have some hope that this will not be another excercise in wastefullness, especially seeing a particular industry which is immensely valuable to the common good is being put to the sword to achieve this.

Off course Labour's spin will make no mention of the risk:return trade-off inherent in the 'super profits' they are so happy to get their paws into. You do not invest in a high risk mining venture without a significant ROE.

It is just dumb populism this.

Mofra said:

3/138 is a little bit of a misnomer.

Rudd is a popularist style politician, in that the polls are more important than getting the right thing done at the right time. I have no doubt that there are more reforms that he may perceive as unpopular that he will include in the first post-election budget, should he be re-elected.

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Worth repeating again for those criticising a lack of volume of reforms.

Be careful what you wish for... you might get it.

Do we really want more rushed changes and schemes to end up in a scrambled mash or should we be greatful that maybe this time Rudd is showing signs of taking things a bit slower in an effort to, or that the people can speak out to, help to get the implementation right.

LMAO@Nunthewiser ....... Once agan Whiskers you have failed to read what is in front of you. I am trying to get you to the point where I can actually have a meaningful debate without the peripheral, obtuse remarks from your good self. If you actually concentrate and enucleate with clarity, I have seen a few flashes of genuine brilliance only to descend into a hopeless fug of despair with your inarticulate verbosity.

Anyways ...... :horse:

Henry Tax Reform sugested a 40% tax on mining companies BUT also sugested the state royalties be removed. This does not seem to be the case now does it?

cutz said:

When boom turns to bust we'll see who's not wearing clothes.

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Rudd, Swan and Gillard for a start unless as a people we drown them (politically) before the tide goes out.

Abbott's swimming with his pants down and occasionally likes to fart bubbles in the water like a child (something he will need to correct) and turnbull I'm yet to make up my mind on.

@ Whiskers - how many people have to tell you to please take your ball elsewhere if you cannot play nice before you reach enlightenment?

Here is my opinion.

Increasing super contribution rate - bad idea - my views on superannuation and the horrible nature of this vehicle as an investment mechanism is well stated on these boards. Much of the "working families" the Krudd refers to don't have the financial knowledge or experience to effectively use this increase to their advantage. Meaning that they will be left to the tender mercies of financial planners and advisers, whose pie just got bigger. I'm sure the financial companies will be laughing all the way to the bank.

When the government reviewed superannuation several years ago and compared the actual numbers with the projected numbers which were wildly different, the response from Finance companies boiled down to "Well there wasn't enough money in super to start with which is why our fees seem high." And so the government response to Tax reform is....more of the same.

Resources tax - it's a blatant tax grab that I think will work in the short-term, but be negative over the long-term. It takes a finite period of time to go from bare dirt to hole in the ground and production. It also take a finite period of time to close down the operation because it is no longer economic. The mining companies in the short-term therefore will have to just grin and bear it until they are in a position to change the metrics. Over the longer term I see this affecting the production and infrastructure capacity in Domestic mining concerns. Watch for significant price increases in commodities in about 4 years and significant bottlenecks in about three to five years - despite the 1/3 of the tax being spent on infrastructure.

Company tax reduction - makes investing within company structures more attractive because there has not been a reduction in personal tax or an increase in the tax free threshold. There will be long-term benefits in using this structure as an investment vehicle. I can see a bunch of people putting funds into company structures and then down the track one of the other nasties that Ken recommended (Playing with dividend imputation comes to mind) being used to suck additional tax revenue from the increase. IE Carrot before the stick.

Whilst I disagree with the vast majority of Ken Henry's report as being too "inside the box" and just an extension of existing policy I think it is laughable that just two and half recommendations were taken up...before the election. Unfortunately I can't see the opposition's response being any better as they will both be working from the same badly designed report.

Cheers

Sir O

Bushman said:

Off course Labour's spin will make no mention of the risk:return trade-off inherent in the 'super profits' they are so happy to get their paws into. You do not invest in a high risk mining venture without a significant ROE.

It is just dumb populism this.

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I'm not sure it's dumb populism... maybe clever, cunning etc

It's worth remembering that Aus is a far more politically stable country than our main mineral competitors and is closer to the main future consumers of China and India.

Also Aus has far less national debt than our main competitors who at some time will have to raise more revenue. Many of them are facing civil unrest as previous posters have mentioned at the huge disparity in the distribution of their nations wealth. Every other day we hear of strikes, accidents and civil unrest disrupting or closing a mine in South America or Africa.

One of two things will happen for our competitors. If the disparity continues history shows that civil unrest, civil war etc will continue and esculate OR the gov will reform (increase) the tax system to appease the population.

In summary, stepping outside the square, it seems Rudd senses that he has some room to press here, before the conglomerates consider the competitors sovereign risk is more attractive than his increased 'super' or 'windfall' tax.

In general it seems there is scope for the gov to rationalise the resource rent/tax system and gather a bit more tax before the miners seriously contemplating abandoning Aus.

My concern is that they don't get the formula and implementation much better than they have in most other things.

To that extent, I wish the critics would lay off the ridicule of minimal changes does not equal tax reform gabble and focus on making sure they do a much better job of what is currently on the adgenda, to get it right.

Poor old Ken. He is now just a hairy nosed wombat road-kill.

Whiskers said:

Worth repeating again for those criticising a lack of volume of reforms.

Be careful what you wish for... you might get it.

Do we really want more rushed changes and schemes to end up in a scrambled mash or should we be greatful that maybe this time Rudd is showing signs of taking things a bit slower in an effort to, or that the people can speak out to, help to get the implementation right.

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Or is it that Rudd is sitting on his hands before he implements 'unpopular' reforms after a possible election victory? I think that this is far more likely. Very deceitful Kevin.

Rudd may have a little room to move before mining companies divest enough to make a real difference to our economy, but when you start adding up IR, RRST, and CPRS, that room is getting increasingly smaller.

Abbott needs to come out with an alternative, and show that any additional taxes are going towards securing Australia's future through some kind of sovereign wealth fund. The minerals aren't gonig to be there forever, neither will the red hot demand we are currently experiencing.

Sir Osisofliver said:

Whilst I disagree with the vast majority of Ken Henry's report as being too "inside the box" and just an extension of existing policy I think it is laughable that just two and half recommendations were taken up...before the election. Unfortunately I can't see the opposition's response being any better as they will both be working from the same badly designed report.

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Henry comments that evenue raising should be concentrated on four robust and efficient broad-based taxes:

1) personal income, assessed on a more comprehensive base;

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The review does not go far enough though. There should be no deductions for wage and salary income and lower marginal rates for all. Emphasis should be on a big increase in the tax free threshold as suggested by Henry. Deductions for investments should only relate to untaxed income from that investment class. EDIT: Capital gains tax should only be on real gains (indexed to inflation). Ultimately, income taxes (including CGT) should be done away with all together (as should middle class welfare) with government services supported purely by consumption/corporate taxes.

With the exception of a basic safety net, tax should not play a role in wealth redistribution nor should it be possible to gain advantage over others through tax minimisation schemes with no underlying economic merit.

2) business income, designed to support economic growth;

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Where company profit is distributed after tax (franked), it should be tax free in the hands of the shareholder. This would preserve the integrity of the corporate tax base.

3) economic rents from natural resources and land;

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Natural resources belong to us all so it's only fair that the people get a fair return from their exploitation. The extent to which this is reflected by a RRT on top of company tax is a subject for further debate in itself. The level of a RRT should however reflect long term objectives of continued resource extraction.

If the tax base for income/corporate/consumption taxes are robust, why tax land ?
That's double dipping as the money used to purchase that land has allready been taxed.

Come to think of it, it's triple dipping as we all ready pay what is effectively a land tax to local government for their services.

4) private consumption.

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In order of taxes this should be first and cover all consumable items. Investment no and that includes rent. Land should only be subject to a consumption tax to the extent real value is added (via subdivision for example).

There, you have it. The Smith Review.

To whom do I send the invoice ?

nunthewiser said:

I think you need to get out more whiskers.

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lol yeah I know. Just one more response and I'll go and do something outside.

trainspotter said:

LMAO@Nunthewiser ....... Once agan Whiskers you have failed to read what is in front of you. I am trying to get you to the point where I can actually have a meaningful debate without the peripheral, obtuse remarks from your good self. If you actually concentrate and enucleate with clarity, I have seen a few flashes of genuine brilliance only to descend into a hopeless fug of despair with your inarticulate verbosity.

Anyways ...... :horse:

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That's gold and spot on mate.

The problem is I'm only human and I get tired reading so much generalised and ctitical for the sake of criticism commentry and try to decipher the main points from often a miss mash of different issues inter-twined in some comments.

Too often I've tried to focus on one issue at a time and ask specific questions but most often no specific relative response comes back. Just more evasive, critical dare I say it 'waffle' trying to put me off.

Henry Tax Reform sugested a 40% tax on mining companies BUT also sugested the state royalties be removed. This does not seem to be the case now does it?

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Well, lets work on this issue alone for a moment.

As I have mooted a number of times now, I suggest Rudd probably has an adgenda to mavouvre into a position of relieving the states of the main control of mining activities and revenue. In principal it may be a good thing for a national takeover and uniform taxes and royalties based more on revenue or profits than tonnage, but...

It's still early days, and the States will no doubt balk at the idea. I'm waiting for the detail of how Rudd is going to manipulate his announcements and changes to eventually probably corner the states into submitting to some sort of takeover.

The problem he faces is to get the states to agree to and honour an agreement to remove state royalties, bearing in mind they didn't remove those state taxes when the GST was implemented.

drsmith said:

Natural resources belong to us all so it's only fair that the people get a fair return from their exploitation. The extent to which this is reflected by a RRT on top of company tax is a subject for further debate in itself. The level of a RRT should however reflect the long term objectives of continued resource extraction.

If the tax base for income/corporate/consumption taxes are robust, why tax land ?
That's double dipping as the money used to purchase that land has allready been taxed.

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RRT is double taxation... Pay RRT on what you extract then pay company tax.
Miners with assets overseas are fine but Aussie miners are screwed.
If you're earing more than 6% on your mine you'll get slugged with the RRT.

Existing mines will fill govt coffers. But new ones? Risk is incredibly high. A potential 30% return on a mine is suddenly 20%
No-one wants to take the risk anymore. No-one wants to expand mines anymore. Why not just buy bonds and earn that 6% RISK FREE.

Killing the golden goose...

Whiskers said:

I'm not sure it's dumb populism... maybe clever, cunning etc

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Believe me Whiskers, I want to believe. As the father of a young daughter, the thought of Abbot bringing his Catholic social agenda to the federal arena makes me shiver.

I agree that the ROE required for backing an off-shore project should be higher compared to an Aussie prject given the sovereign risk. H/e this 'tax grab' damages Australia's reputation with off-shore investors. Mines a long-term investments so you need a long-term stable tax regime to support that time frame.

The comments about BHP being 'foreign owned' is pure spin and deeply inflammatory to foreign investors.

It is 'dumb populism' as it is another scheme dreamt up by Rudd/Swann without testing the longer term ramifications. It is the same approach taken to insulation, ETS, BER, health care. Shoot now, ask questions later.

The Age poll on the Henry Tax Review;

Is the government response to the Henry tax review the ''revolution'' promised?

Yes, increasing compulsory super paid by employers to 12 per cent is itself a significant change for all workers.
9%

No, the government has all but ignored Ken Henry's recommendations in an attempt to be re-elected.
91%
Total votes: 6019.

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http://images.theage.com.au/2010/05/02/1401793/svHENRY-420x0.jpg