Mining Tax Grab - How will it pan out?

Whiskers · 6 June 2010

wayneL said:
Ahhhh Australia.

Beautiful one day,

Socialist the next.

lol, yeah quite true.

But maybe not so funny... swinging, or maybe over-swinging from one extreme to another.

-Bevo- said:
Steve

State Governments sell lease to Miners on behalf of the people for the rights to mine a area in effect they are already paying the people for the use of that land they don't get it for free, then the investors take a risk on capital to develop projects plus pay a company tax and employees are taxed just as everyone else is, also think about the flow on effects to other people / businesses who benefit indirectly who also pay tax, now people like you because of Rudd think they own the minerals and want the profits too.

That (blue highlight) is true.

Investor risk is not really applicable to the tax rate issue, because that risk also has a lot more to do with management decisions. In the GFC for example probably more banks went bust than any other type of business... and they're arguably supposed to be the safest business and experts at risk management.

The problem atm is the rather ad hoc way royalties are set and lack of correlation between the states. In earlier posts I highlighted an example where BHP & RIO pay substantially less royalties than there competitors based on a 1960's and now outdated agreement to develop infrastructure. WA's premier is under pressure from recent court decisions giving new players access to that infrastructure, to level the playing field for new players .

I think the current new tax proposal is in no small part a product of the states refusing to unify and standardise the royalty rates across Australia at reasonable levels and instead competing with each other (states) to keep royalties minimal to attract investment and development to their state which in turn pumps up the state population, employment and economic activity data that determines their share of the Commonwealth handouts at COAG each year.

So, in summary, whichever way you look at it miners have got to keep quite a bit more proportionally from the substantial rise in mineral prices over the last decade. We have an adulterated tax/royalty system atm. My hope is that it will all be less adulterated when all this 'reform' is finished.

-Bevo- · 6 June 2010

dutchie said:
The bottom line is that the money (profits) will be either spent by the mining companies (admittedly some will go overseas but profits of mining companies from other countries also comes to Australia) back into the Australian economy (new projects etc) or the profits will go to the government to spend in the economy.

I know who I would prefer to spend the money!

Yep good example of that here

Canadian goldminer decries 'horrible' tax

IT HAS been a bitter-sweet week for Canada's Crocodile Gold Corp. It has just declared the first commercial production from its revival of a suite of gold projects in the Northern Territory that it acquired last year from the liquidator of GBS Gold Australia, spending $120 million and creating 300 jobs in the process.

http://www.smh.com.au/business/canadian-goldminer-decries-horrible-tax-20100604-xktg.html

If Rudd stuffs this country, might have too take a look at the TSX.

todster · 6 June 2010

dutchie said:
The bottom line is that the money (profits) will be either spent by the mining companies (admittedly some will go overseas but profits of mining companies from other countries also comes to Australia) back into the Australian economy (new projects etc) or the profits will go to the government to spend in the economy.

I know who I would prefer to spend the money!

Like BHP rapid growth 5 in Port Hedland port expansion,structual steel made in Thailand on the cheap and bolted together
by aussie and kiwi muppets
Dig big holes in the ground put it on ships to china/japan to make steel who sell it to Thailand to make beams so we can dig more holes
Do we make anything beyond big holes?
We do make a nice hole though

Julia · 6 June 2010

Whiskers said:
Julia, from what I understand the 'retrospectivity' aspect that some don't like is that the proposed new tax will apply to existing projects.

Um, Whiskers, I had actually managed to figure that out, believe it or not
My mention of it again was with regard to brty saying a few pages ago that it wasn't retrospective because it didn't apply to previous years' tax paid.

Some only want it to apply to new projects. The new system isn't proposed to recalculate the tax of past years as Murray tends to carelessly imply.

I don't think he implied any such thing, and I'd not regard Mr Murray as 'careless' in any sense. On the contrary, his remarks are usually cautious and well considered.

People will have to accept lower standards of living and lower gov expenditure, higher taxes to pay off debt or go bust individually and as a country. I just see the higher tax at the 11th hour as being the most likely course.

Hmm, or perhaps we could have a government that doesn't waste billions on dodgy schemes and spurious advertising.

-Bevo- said:
Steve

State Governments sell lease to Miners on behalf of the people for the rights to mine a area in effect they are already paying the people for the use of that land they don't get it for free, then the investors take a risk on capital to develop projects plus pay a company tax and employees are taxed just as everyone else is, also think about the flow on effects to other people / businesses who benefit indirectly who also pay tax, now people like you because of Rudd think they own the minerals and want the profits too.

Exactly.
I don't suppose the government would do such a thing as send its disciples out into stockmarket forumland to promote its message?
Probably I should wash my mouth out for such an unkind utterance.

dutchie said:
The bottom line is that the money (profits) will be either spent by the mining companies (admittedly some will go overseas but profits of mining companies from other countries also comes to Australia) back into the Australian economy (new projects etc) or the profits will go to the government to spend in the economy.

I know who I would prefer to spend the money!

Yep, me too.

Whiskers · 6 June 2010

dutchie said:
The bottom line is that the money (profits) will be either spent by the mining companies (admittedly some will go overseas but profits of mining companies from other countries also comes to Australia) back into the Australian economy (new projects etc) or the profits will go to the government to spend in the economy.

I know who I would prefer to spend the money!

Yeah dutchie, I agree... but the reality is that governments will need more income (tax & royalties) to defray generally rising debt and ageing population issues.

There are some worrying aspects of the original proposal, but when Henry was dealing with the fact that the states were adulterating the overall tax/royalty revenue system this sort of formula of a profit based tax with deductions/rebates for royalties already paid to states with a 2% income tax cut is about the only way around collecting a proportional share of the mineral wealth as mineral prices go higher, because state royalties are a flat rate on production that has hardly changed for the reasons I mentioned in post above.

I suggest that if the states were to correlate and standardise their royalties to rises in something like average metal prices, profits or some sort of mix, then this fed tax proposal would be killed off quicker than you could say Jack Johnson.

-Bevo- · 6 June 2010

Whiskers said:
Investor risk is not really applicable to the tax rate issue, because that risk also has a lot more to do with management decisions. In the GFC for example probably more banks went bust than any other type of business... and they're arguably supposed to be the safest business and experts at risk management.

I was refering to risk taken from investor to fund a project yes I see your point with management decisions, but for the risk taken I don't see a problem with the investor / company receiving higher returns unlike Steve who wants some of the profits without the risk, although as I understand it the government will refund 40% of losses under this tax so taxpayer's could see some big bills coming its way if a major project fails.

I don't agree with the banks supposed to be safest business, although I don't have any figures to back this up but if you went back over the past 100 years and had a look at failures I think banks would be high on the list.

medicowallet · 6 June 2010

Whiskers said:
Yeah dutchie, I agree... but the reality is that governments will need more income (tax & royalties) to defray generally rising debt and ageing population issues.

And trust them to take the easy, inefficient option. There are other options available to them which do not destroy people's investments/super, discourage billions of dollars of investment, and actually increase productivity.

Unfortunately our PM is too much of a coward to do what is right, and is only worried about elections.

Whiskers · 6 June 2010

Julia said:
Um, Whiskers, I had actually managed to figure that out, believe it or not
My mention of it again was with regard to brty saying a few pages ago that it wasn't retrospective because it didn't apply to previous years' tax paid.

Well then I'm not sure what you meant...

I don't think he implied any such thing, and I'd not regard Mr Murray as 'careless' in any sense. On the contrary, his remarks are usually cautious and well considered.

Well to a cursory reading of his comment by an uninformed person it could easily imply that tax (calculation) was retrospective

"You've got to have a sensible collection of taxes and royalties when returns are strong, but you can't apply these retrospectively because you won't get investment."

Hmm, or perhaps we could have a government that doesn't waste billions on dodgy schemes and spurious advertising.

Yes quite true, but this gov is not unique in that regard either... but rather than crying or getting resentful over spilt milk, I prefer to do my best to properly inform people about what this new proposal means in an effeot to try to get it's application much better than previous 'reform' attempts.

Exactly.
I don't suppose the government would do such a thing as send its disciples out into stockmarket forumland to promote its message?
Probably I should wash my mouth out for such an unkind utterance.

You certainly should, : even if I was a gov disciple, why can't we keep the discussion on the issue rather than distorting your perceptions with personality issues. Rule number one of conflict resolution.

-Bevo- said:
I was refering to risk taken from investor to fund a project yes I see your point with management decisions, but for the risk taken I don't see a problem with the investor / company receiving higher returns unlike Steve who wants some of the profits without the risk, although as I understand it the government will refund 40% of losses under this tax so taxpayer's could see some big bills coming its way if a major project fails.

I don't agree with the banks supposed to be safest business, although I don't have any figures to back this up but if you went back over the past 100 years and had a look at failures I think banks would be high on the list.

Yes I see your point there.

My point is the general belief (public perception) that banks are the safest place to put your money/investment.

Cartainly agree the risk reward issue is still a problem and I do think that refund of losses will be scrapped. The gov needs the support of the greens and independants to get this into law, and unless the gov wins more seats this election, which is highly unlikely, the greens who are tipped to gain some, will demand this aspect is cut.

Whiskers · 6 June 2010

medicowallet said:
And trust them to take the easy, inefficient option. There are other options available to them which do not destroy people's investments/super, discourage billions of dollars of investment, and actually increase productivity.

Unfortunately our PM is too much of a coward to do what is right, and is only worried about elections.

Yes medicowallet, but from a psychological perspective I think Rudd is about determined as they come and has got this issue firmy in his psyche and I suspect will not let it go until it either gets through in some heavily ammended form a la hospital funding reform, or he looses power.

It is clearly something he is very passionate about. The issue remains to be seen whether his passion will give way to more pragmatism or conceed (defeat).

Trembling Hand · 6 June 2010

The retrospective nature of the tax that people complain about is that existing mines/companies will not be able take advantage of the 40% loss provision on old projects because the failed ones that have been invested in have now gone. All thats left are the winners which the Gov wants there slice of.

The other retrospective part is the capital depreciations cost have for a lot of existing mines gone so the Gov is jumping in after cost.

No one disagrees with a rent tax in theory. In fact I think the miners have had the idea out there for some time. What is a disgrace is the implementation and lack of consolation. Just another disgusting example of our Ministerial Parliamentary system putting far too much power into 1 or two Muppets hands, Internet filter, 'Pacific Solution', NBN, for example now this god almighty mess.

trainspotter · 6 June 2010

Just so we are all clear on this spelling ...... there is no such thing as "looses" ... it is LOSES. Something can be let "LOOSE" .. like my temper. Or I can LOSE it .... Like my temper.

Some light reading for you here Whiskers. http://www.cpa.org.au/guardian/2010/1457/09-mining-companies.html .. The truth is out there !

It appears your somewhat narrow view on reality has distorted your thinking. Are you a university student? A self made philanthropist? A retired business banker? I am curious as to what it is you actually do for someone so opinionated in the misguided sense.

Julia · 6 June 2010

stv said:
I think the new resources tax is a good idea and it is good to see that the miners' will be paying us the aust people for the use of our resources.

Its alright for them to make $$s from mining, but maybe they have not been paying the aust people enough up until now is regards to mining our finite resources.

I also like Kevin, and am thankful that he is PM and not speedo Tony or honest John.

steve

Posted by Julia:I don't suppose the government would do such a thing as send its disciples out into stockmarket forumland to promote its message?
Probably I should wash my mouth out for such an unkind utterance.

Whiskers said:
You certainly should, : even if I was a gov disciple, why can't we keep the discussion on the issue rather than distorting your perceptions with personality issues. Rule number one of conflict resolution.
.

Oh dear, Whiskers, I wasn't referring to you. I should have quoted the above post from steve with my comment.
Suddenly we have steve, with three posts, coming onto this thread to tell us how great our Kev is. Doesn't tell us anything but parrots off a version of the government line about how 'working bloody families' (I will scream if I hear that expression again) haven't been getting a fair share from the greedy miners.

medicowallet · 6 June 2010

OK people stop using the term 'working bloody families'

Julia · 6 June 2010

medicowallet said:
OK people stop using the term 'working bloody families'

Sorry, I shouldn't have included the curse.
I doubt that I'm the only one who is well and truly sick of this phrase, though.

starwars_guy456 · 6 June 2010

Julia said:
Sorry, I shouldn't have included the curse.
I doubt that I'm the only one who is well and truly sick of this phrase, though.

I haven't heard this phrase much lately though... perhaps they don't want to remind those unemployed of the state of the economy?

Bushman · 7 June 2010

-Bevo- said:
although as I understand it the government will refund 40% of losses under this tax so taxpayer's could see some big bills coming its way if a major project fails.

That's the thing Bevo, there is no way in hell that a sitting government will stump up the cash for a failed mining venture.

That is why financiers will not accept it.

trainspotter · 7 June 2010

Whiskers said:
Off topic a bit, BUT I don't know if you've noticed decent rises in base metals in the last few hours, about 4% rise in copper, not to mention the FTSE and Europe up 5%, US futures up and good, lower loan default news in the US etc.

This'll be one hell of a dead cat bounce.

Somehow I'm thinking our mining industry will purrrrr on nicely, without missing a beat. :

Hows the mining companies going now Whiskers? Puuuurrrring along nicely aren't they? How did the dead cat bounce work out for you as well?

LMFAO ....... I can't possibly take anything you write in here seriously anymore. Go and put your asshat back on. It suits you.

I am out of here !

Whiskers · 7 June 2010

Julia said:
Oh dear, Whiskers, I wasn't referring to you. I should have quoted the above post from steve with my comment.
Suddenly we have steve, with three posts, coming onto this thread to tell us how great our Kev is. Doesn't tell us anything but parrots off a version of the government line about how 'working bloody families' (I will scream if I hear that expression again) haven't been getting a fair share from the greedy miners.

Whew... that good!

Whiskers · 7 June 2010

trainspotter said:
Hows the mining companies going now Whiskers? Puuuurrrring along nicely aren't they? How did the dead cat bounce work out for you as well?

LMFAO ....... I can't possibly take anything you write in here seriously anymore. Go and put your asshat back on. It suits you.

I am out of here !

Yes trainspotter, purring on nicely in the context of everything that is happening in the markets around the world.

Have a look at the Aus market since the Henry review was released.

The Metals & Miners (XMM) are performing at least as well as the overall market (XAO) and certainly better than the Industrials (XNJ) which are generally pulling our market down.

Whiskers · 7 June 2010

Trembling Hand said:
The retrospective nature of the tax that people complain about is that existing mines/companies will not be able take advantage of the 40% loss provision on old projects because the failed ones that have been invested in have now gone. All thats left are the winners which the Gov wants there slice of.

The other retrospective part is the capital depreciations cost have for a lot of existing mines gone so the Gov is jumping in after cost.

No one disagrees with a rent tax in theory. In fact I think the miners have had the idea out there for some time. What is a disgrace is the implementation and lack of consolation. Just another disgusting example of our Ministerial Parliamentary system putting far too much power into 1 or two Muppets hands, Internet filter, 'Pacific Solution', NBN, for example now this god almighty mess.

That's a brilliantly intellectual post TH. I'm proud of you.

Mining Tax Grab - How will it pan out?

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