The future of energy generation and storage

[Value Collector]

I don't doubt for a moment that private enterprise could do it.

As one example AGL ran the gas supply in Sydney for over 150 years without much drama. Costs were kept down and they built the entire thing from scratch as a for-profit company. Their prices weren't expensive.

Now there's competition for the supply of gas however. Long story short you won't see anyone offering it anywhere near as cheaply as AGL's monopoly did in the past. Faced with competition and the need to offer competitive pricing AGL itself now charges 89% more in real terms (inflation adjusted) for gas in Sydney than it did 30 years ago in 1987.

Back then AGL was pretty much the only purchaser of gas from the suppliers.

We had a few suppliers competing to sell a limited amount of other wise stranded gas to the one buyer, So AGL was able to screw the suppliers price down.

Now however its no longer 1 pipeline with 1 customer at the end, Due to the great work of APA building a "National Gas Grid" and other companies building infrastructure to connect that grid to global markets, Suppliers are now spoiled for choice and have countless potential customers all over Australia and Asia, AGL can't screw them anymore.

Also not to mention Coal, which is a big competitor of gas in the electricity market, is being held back from competing, and new gas suppliers are being held back from entering new supply, So its a sellers market.

 

[Value Collector]

And as we all know, the likes of BHP and RIO don't book their real profit in Australia do they? .

Some how they usually always end up in the top 10 largest tax payers in Australia.

In 2015, they were 1 & 2 on the list.

https://www.businessinsider.com.au/here-are-the-16-biggest-tax-paying-companies-in-australia-2015-12


The ATO only disputes $667 Million of BHP tax for the last 11 years, meanwhile they having been paying Billions in tax to Australia every year, So you claim is pretty over the top.

You didn't just read the headlines and assume they don't pay tax did you?

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Countries always fight over which country should be able to charge tax, Australia obviously wants to get tax dollars that are currently being paid in Singapore, they may be right to want that or they may be wrong, it depends on the details, and how much value is being added by the marketing teams in Singapore.

 

[luutzu]

Some how they usually always end up in the top 10 largest tax payers in Australia.

In 2015, they were 1 & 2 on the list.

https://www.businessinsider.com.au/here-are-the-16-biggest-tax-paying-companies-in-australia-2015-12

Tax equality can't be measured on a nominal/dollar basis.

Like I said before, paying millions or billions in taxes sounds like a lot, and it is a lot. But it's peanut if the real profit is many times what is claimed on the financial statement.

Didn't an enquiry a few years back found that BHP and RIO under-declare their actual profit? The recent leaks revealed in the Paradise Papers revealed the likes of Nike and Glencore making billions of profit on Bermuda - at 0% tax too. You see any mines or Nike stores on Bermuda?

To see whether a corporation or a person is paying their fair share, you'd have to do two things:

1. Figure out what their actual, real profit is - not the reported profit after tax games and creative accounting.

2. Reduce it to a percentage.

So if BHP and RIO, say, sell the ores and other commonwealth of Australia's assets to a subsidiary or ten of theirs at little or no profit. Then those subsidiaries onsell almost immediately, through a few keystrokes, to the end customers at massive profit... you know the maths right?

But it's all legal so I guess those who pay the most amount is the most productive and patriotic corporate citizens.

Like Jesus says, a poor man who gave a $5 that is half his assets is not as kind as a rich man who gave $500 that is his pocket change.

 

[Value Collector]

Tax equality can't be measured on a nominal/dollar basis.

Like I said before, paying millions or billions in taxes sounds like a lot, and it is a lot. But it's peanut if the real profit is many times what is claimed on the financial statement.

The ato has been looking in BHP for years, and have only disputed $667 Million in tax over the last 11 years, this compares to BHP's actual tax paid to Australia of more than $20 Billion over that time, I see that as peanuts.

A good marketing team does add value to a miner, other wise why do they employ people to market the ORE?

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Let me use another example to highlight what I mean.

Take the iPhone as an example (or any gadget)

Apple designs it in California
Builds it in China for $200
Then sells it in Sydney at the apple store for $1000.

Lets say it cost them $200 to make it, and they had an $800 profit.

Was that full $800 earned in China when the product was Built?

or was it made in Sydney when the phone was sold?

or was it the design team in California?

The correct answer would be all three places.

But if china tried to say that all the $800 should be reported and taxed in china they would be wrong, because clearly the marketing team in Sydney added value.

If Apple's manufacturing division in china sold the phone for $400 to the marketing division in Sydney then the marketing division sold it for $800, but then the marketing division also paid a royalty to their design division, in California, all the countries might fight about who should be getting the tax dollars, but not real tax avoidance may be happening.

 

[SirRumpole]

If Apple's manufacturing division in china sold the phone for $400 to the marketing division in Sydney then the marketing division sold it for $800, but then the marketing division also paid a royalty to their design division, in California, all the countries might fight about who should be getting the tax dollars, but not real tax avoidance may be happening.

Profit is only made when the goods are actually sold which is in Australia.

Profit is so easy to manipulate which is why I think we should be moving towards another system that is harder to avoid like a tax applied to all monies leaving the country, say x%, which is on the total price charged to the customer and remitted to the company. If the companies think that x is excessive then they would have to show that their total profit on the item is less than x% of the selling price.

 

[Value Collector]

Profit is only made when the goods are actually sold which is in Australia.

So Bhp and Rio shouldn't be paying much tax in Australia at all, considering most of their products are exported and sold overseas.

Be careful what you wish for.

 

[luutzu]

The ato has been looking in BHP for years, and have only disputed $667 Million in tax over the last 11 years, this compares to BHP's actual tax paid to Australia of more than $20 Billion over that time, I see that as peanuts.

A good marketing team does add value to a miner, other wise why do they employ people to market the ORE?

-----------------------------------------------

Let me use another example to highlight what I mean.

Take the iPhone as an example (or any gadget)

Apple designs it in California
Builds it in China for $200
Then sells it in Sydney at the apple store for $1000.

Lets say it cost them $200 to make it, and they had an $800 profit.

Was that full $800 earned in China when the product was Built?

or was it made in Sydney when the phone was sold?

or was it the design team in California?

The correct answer would be all three places.

But if china tried to say that all the $800 should be reported and taxed in china they would be wrong, because clearly the marketing team in Sydney added value.

If Apple's manufacturing division in china sold the phone for $400 to the marketing division in Sydney then the marketing division sold it for $800, but then the marketing division also paid a royalty to their design division, in California, all the countries might fight about who should be getting the tax dollars, but not real tax avoidance may be happening.

Tax "minimisation" on that scale and that open, yet it's legal. That's a problem right there.

So past 11 years BHP paid $11B in taxes.

At 30% tax rate, its net profit over that same time would be 11x3 =$33B?

So if BHP paid its fair, legally specified, tax, its net profit would be $33B or there about.

As shareholders, and assuming BHP paid all its net earnings to shareholders... that's net profit paid as dividends of 33-11 = $22B in dividends.

Oh look... over the past decade it paid its shareholders $62B, US dollars.

Where's the extra $40B of earnings/profits from?

From the BHP Plc half?

Come on man.

And yes, it did also say it paid $US84B around the world in taxes, royalties and "other payments"... what's the other payments? Charities, fines?

 

[luutzu]

Profit is only made when the goods are actually sold which is in Australia.

Profit is so easy to manipulate which is why I think we should be moving towards another system that is harder to avoid like a tax applied to all monies leaving the country, say x%, which is on the total price charged to the customer and remitted to the company. If the companies think that x is excessive then they would have to show that their total profit on the item is less than x% of the selling price.

The Four Corners investigation on the Paradise Papers show how one of the schemes used by these multi-nationals to reduce tax is by indebting their subsidiaries in "high" tax countries like Australia. Interest is tax deductible so why not invest for the future here?

On tax havens like Bermuda... not much expenses, just billions in profits, at zero tax.

From the same report, Nike don't even have a shoe shop over in Bermuda yet it somehow managed to earn crap load of profits there. Incredible.

 

[luutzu]

So Bhp and Rio shouldn't be paying much tax in Australia at all, considering most of their products are exported and sold overseas.

Be careful what you wish for.

Pretty sure they don't sell it overseas.

They send it overseas, but sold it here in Australia.

And you can't tell me that their marketing team in Singapore earn the extra mark up because buyers like the presentation and brochures and good manners.

 

[Value Collector]

Tax "minimisation" on that scale and that open, yet it's legal. That's a problem right there.

So past 11 years BHP paid $11B in taxes.

At 30% tax rate, its net profit over that same time would be 11x3 =$33B?

So if BHP paid its fair, legally specified, tax, its net profit would be $33B or there about.

As shareholders, and assuming BHP paid all its net earnings to shareholders... that's net profit paid as dividends of 33-11 = $22B in dividends.

Oh look... over the past decade it paid its shareholders $62B, US dollars.

Where's the extra $40B of earnings/profits from?

From the BHP Plc half?

Come on man.

View attachment 84914


And yes, it did also say it paid $US84B around the world in taxes, royalties and "other payments"... what's the other payments? Charities, fines?

Dude your math needs some work, not all profit is generated in Australia, so they pay a lot of tax over seas e.g. the $84 billion.

Eg,

If they earn $1billion mining copper in South America and pay 25% tax there, they only have to pay an additional 5% tax here to bring it up to the 30% tax rate.

So the $1 billion would look like this.

$250 Million tax to chile
$ 50 Million tax to Australia
$700 Million available for dividends.

 

[Value Collector]

Pretty sure they don't sell it overseas.

They send it overseas, but sold it here in Australia.

And you can't tell me that their marketing team in Singapore earn the extra mark up because buyers like the presentation and brochures and good manners.

The marketing division can do all sorts of things, hedging, negotiations, dealing contracts etc.

A good marketing team do create value, otherwise why are they there.

 

[luutzu]

Dude your math needs some work, not all profit is generated in Australia, so they pay a lot of tax over seas e.g. the $84 billion.

Eg,

If they earn $1billion mining copper in South America and pay 25% tax there, they only have to pay an additional 5% tax here to bring it up to the 30% tax rate.

So the $1 billion would look like this.

$250 Million tax to chile
$ 50 Million tax to Australia
$700 Million available for dividends.

Fair enough.

Just somehow I doubt the majority of their earnings are from overseas though.

$11B to the ATO, some $88B to shareholders [rate at 70centUS]...

Historical payout ratio seems to be around 80%, so that's [$88/80]*100 = $110B over 10 years profit after tax.

Tax assumed at 30%... $110B is 70% of earnings before tax. That gives it [110/70]*100 = $157B profit before tax.

At 30% tax, that's 0.3*157 = $47B.

Of that $47B, ATO got $11B, or 23%....

So can we assume that, according to that rough estimate, 1/4th of BHP's earnings are in Australia, from Australian resources?

Let's dig up its revenues by geography shall we.

 

[luutzu]

Oh look, most of its noncurrent assets are in Australia.

The least profitable assets are where BHP made its fortunes. Strange how it makes the least profit from resources closest to its biggest customer... and those ores and assets are known to be of high quality too

 

[luutzu]

The marketing division can do all sorts of things, hedging, negotiations, dealing contracts etc.

A good marketing team do create value, otherwise why are they there.

Strange how them marketing hub tend to be in the lowest tax havens.

I guess sunshine and sea breezes away from Australia help with the creative juices.

 

[Value Collector]

Fair enough.

Just somehow I doubt the majority of their earnings are from overseas though.

$11B to the ATO, some $88B to shareholders [rate at 70centUS]...

Historical payout ratio seems to be around 80%, so that's [$88/80]*100 = $110B over 10 years profit after tax.

Tax assumed at 30%... $110B is 70% of earnings before tax. That gives it [110/70]*100 = $157B profit before tax.

At 30% tax, that's 0.3*157 = $47B.

Of that $47B, ATO got $11B, or 23%....

So can we assume that, according to that rough estimate, 1/4th of BHP's earnings are in Australia, from Australian resources?

Let's dig up its revenues by geography shall we.

Where are you getting the $11 billion tax figure from? They paid over $3billion in 2015 alone and $1.7 billion last year.

I have looked at all the years but I thought it would be more than $11 billion

 

[Value Collector]

Strange how them marketing hub tend to be in the lowest tax havens.

I guess sunshine and sea breezes away from Australia help with the creative juices.

Singapore is where the metals exchange is, and has grown as a large trading and financial centre, did bhp start all that?

Singapore has been a hub for international trade for years

They also have a trading hub in London.

 

[Value Collector]

So past 11 years BHP paid $11B in taxes.

At 30% tax rate, its net profit over that same time would be 11x3 =$33B?

Can you check your claim here.

Because the Numbers I am seeing say BHP paid an average of $5.85 Billion per year year in Australia from 2005 to 2014, which blows your entire premise out of the water.

Where are you getting the $11 Billion in 11 years number from?

 

[SirRumpole]

Hey guys, this is an electricity thread not a tax thread !

 

[luutzu]

Where are you getting the $11 billion tax figure from? They paid over $3billion in 2015 alone and $1.7 billion last year.

I have looked at all the years but I thought it would be more than $11 billion

Was late, I saw 11 years and thought $11B.

So you said they paid some $20B over the past 11 years, right? Can we assume that the 11th year [2006], during a mining boom, their income tax to the ATO would be... average of the $3B in 2015 [the bust year?] and $1.7B... so that's $2.35B... take from the $20B over 11 years leave $17.65B to the ATO.

I'm assuming my maths on the estimate is somewhere about right...

At 30% tax, that's 0.3*157 = $47B in tax.

Of that $47B, ATO got $17.65B [not the $11B]. So that's 37% instead of 23% I mistook before.

From the couple of charts and figures above, BHP has some 51% to 61% of their long term assets [non-financials, i.e. mines and a few buildings and tool sheds]... more than half in Australia.

So if more than half of their assets are in Australia, why are they paying some 1/3 of taxes to the ATO?

Dam unions!

 

[luutzu]

Singapore is where the metals exchange is, and has grown as a large trading and financial centre, did bhp start all that?

Singapore has been a hub for international trade for years

They also have a trading hub in London.

Like I said, it's legal. I'm not saying they're breaking the law, just maybe they have politicians write laws to make business more efficient and things of that nature. If being efficient mean paying less taxes, I guess that's alright.

So if you have an orchard or a mine that you own and you lease it to me at a very, very low fixed price plus bigger royalties on the profit.

I take your assets, I set up subsidiaries, push as much expenses into those sub as I could get lenders to lend me... then I claim a low profit margin. Then to add the cherry on top I don't actually sell those assets of yours to the end customer... I sell it to my other businesses, at market price of course... then that other businesses of mine trade it onto the end customers at a great mark up.

That's cool with you?

I know you're a better person than me because you believe these are all acceptable practices, that's why you would own them. Me, I know they're screwing people but I needed the money so yea.

Dam, the moral decay is worst than I thought.