Resources Rent Tax - Lower value minerals?

[drsmith]

Recent Commentary has suggested that the proposed RRT will be levied on all minerals including including fertilisers, sand and stone.

http://www.businessspectator.com.au...onceived-pd20100514-5ET5A?OpenDocument&src=mp

Abbott also made the obvious but telling point that not all ''resources'' are the same. While the government might want to characterise the tax as a tax on greedy foreign-owned exploiters of our natural resources – despite the fact that the big miners are net investors in this jurisdiction – the ''super tax'' would apply to low-margin stuff in the ground, like fertilisers and sand and stone, which are hardly super-profitable. A one-size-fits-all tax would have some rather severe unintended consequences, which is why BHP Billiton's Marius Kloppers has been arguing for differential tax rates for different types of resources.

According to Henry this should not be the case;

http://www.taxreview.treasury.gov.a...ons/papers/Final_Report_Part_1/chapter_12.htm

C1b
applies to non-renewable resource (oil, gas and minerals) projects, except for lower value minerals for which it can be expected to generate no net benefits. Excepted minerals could continue to be subject to existing arrangements if appropriate;

But in the government's response to Henry it appears that they are.

http://www.futuretax.gov.au/documents/attachments/Announcement_document.pdf

5.2 Which resources will be subject to the Resource Super Profits Tax
RSPT will apply to all mining and petroleum projects, with the exception of PRRT projects, for which
opt‐in arrangements will be developed in consultation with industry. This differs from the Australia’s
Future Tax System recommendation (Henry) that the RSPT replace the PRRT and that certain low‐value
commodities be excluded from application of the RSPT on the grounds that compliance costs would
likely exceed the benefits from application of the scheme.

If applied to domestic consumption it will also be a new tax (by stealth) on the Australian people. Section 5.3 (Taxing Point) from the above document does not differentiate between export and domestic usage. This suggests that the RRT would apply to the domestic consumption of lower value minerals.

 

[buysellmestuffed]

Re: Resources Rent Tax - Lower value minerals ?

Off topic but i thought that's what the GST was for , a way of taxing the profits of the foreign companies in this country.

 

[drsmith]

Re: Resources Rent Tax - Lower value minerals ?

Wayne swan has finally thrown a punch on the impact of the RRT on lower value minerals claiming that they might do much better in a resource super profits tax than they currently do under state based royalties.

http://www.theaustralian.com.au/bus...ay-more-tax-swan/story-fn5eo6td-1225867346956

This raises the folllowing questions;

1) To what extent do state governments get royalties from the extraction of lower value minerals ?

2) If the state royalty exceeds the RRT, will the federal government rebate the difference between the two ?

Wayne Swan is effectively saying yes to the second question,

“Many of these low-value commodities might do much better in a resource super profits tax than they currently do. Low-value commodities are punished, absolutely punished, by a royalty regime.”

but is that the truth, spin or the ALP changing policy on the run ?

It's interesting that the government has taken a few days to respond to this aspect of Tony Abbott's budget reply.

 

[drsmith]

Re: Resources Rent Tax - Lower value minerals ?

In the link below are the mineral royalty rates for South Australia.

http://outernode.pir.sa.gov.au/__data/assets/pdf_file/0003/123393/Commodity_List_1.5.pdf

As an example, sand has a royalty rate of $0.35 per tonne and an approximate density of 1.5 to 2 tonne per cubic meter so the royalty per cubic meter would be about $0.60.

How would a RRT compare to that ?

 

[bigdog]

Re: Resources Rent Tax - Lower value minerals ?

It is outrageous that the labour govt is claiming the credit for the 3% superannuation when in fact that the employer's will be paying the 3% plus 4.9% payroll tax in Victoria!

A company business makes $1,000,000 profit before tax. The tax is currently 30% or $300,000.

The employees payroll totals $4,000,000 which will increase 3% for the superannuation change from 9% to 12% and will result in additional payroll costs of $120,000 plus payroll 4.9% tax of $5,880 for total $125,880 additional costs.

By reducing tax to 29% will result in a saving of $10,000 ($300,000 reduced to $290,000).

This business will be $115,880 worse off ($125,880-10000 less $10,000).