6 ms·

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy b

by brc 16y ago

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth. The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax. So instead of individual states receiving royalties for mineral wealth - as per the constitution, the tax money would be funnelled to the Federal government, which would then have power over where it was spent. The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders. The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else.

teyc 16y ago
Not quite. Given the price rises, the shareholders would be better off if they just sat on their leases and paid a capital gain. However, there are laws against that too. I believe government policy needs to consider resources are finite. The tragedy of the commons that is being played out at the moment prices the resouces at $0 for the future generation. Just like the way we are pricing fisheries. It is insane.
nl 16y ago
There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. I agree with this The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth. I agree the mining tax was a disaster, but it wasn't as bad as you are making out. The 40% thing was always something that got the headlines, but as you point out it isn't as simple as that because it would have reduced state based royalties. The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax. This is true. The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders. This is also true, but not necessarily a bad thing. Australian urban centres are a long, long way from the mines and some form of distribution probably makes sense. The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else. I don't think the tax was loved by anyone except Rudd's kitchen cabinet (and possibly only by 3 out of them too, judging from how quickly Gillard backed off it). But the goals of the tax are perhaps more broadly backed. The original article touched on the fact that many mining companies avoid investing in the communities (as you'd expect from a profit making entity), and this has caused some issues. From the article: One of the local councils in the Pilbara, Shire of Ashburton, recently refused permission to Rio Tinto to expand its camp around the Tom Price mine. Instead the company has been asked to invest in facilities that will remain after the mine is closed, to spend $247 million on housing, an air strip, and other infrastructure at the town of Pannawonica. This kind of investment, and the employing of locals, is the only move that is going to convince skeptics like Tony Wiltshire. "We were at a town meeting the other day when a representative from a mining company said, 'Come on, we're all up here to make a dollar.' The locals in the room looked at each other and thought, 'What?' We live here. We can cope with the hot summers. We're here for the long term. We are actually better for the multinationals than the contractors they fly in and fly out. We just need them to wake up to the fact that they, and we, are all in it for the long haul." The idea of the tax was to formalize this kind of investment. The way they went about it was probably the worst planned example of domestic politics in Australia since WW2, though!
- megablast 16y ago
  The tax was a great idea, and only hated by mining companies and people who happened to believe everything they see on TV. Most other big mining countries (Canada, Brazil, etc...) are also thinking about bringing in a mining tax like this. All Australians deserve returns from the investment, not just the tiny number of miners, who earn ridiculous sums of money.
  - ShardPhoenix 16y ago
    If more people were willing to do those mining jobs, they wouldn't make so much money.
    - nl 16y ago
      I think he meant the tiny number of mining companies which make all the money - not the small number of employees who make good but not outrageous money.
  - deleted 16y ago
    [deleted]
- brc 16y ago
  If there was some broad-based, phased-in, mineral based price tax/royalty that went into an untouchable, national sovereign wealth fund, then I would agree in-principle to a resources rent tax. As for the regional areas investment, I broadly think that the royalties-for-regions that has been implemented in WA is the way to increase regional investment. What I do not agree with, is taxing the profits of one industry to fill up general revenue lost through bad government spending. You might support it now, but once the pattern is established, any industry might be next, just for doing too well. And that's a bad principle, and against all concepts of fairness and equity. If the government wants more tax money from mining, then they should go to the miners and say 'where can we invest to lower your cost of capital, increase your productivity and increase your competitiveness on the world market'. You'd get double the amount of taxes from a doubling in size of the mining companies, and a lot more employment, to boot.
dejb 16y ago
> The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else. From a 'web startup' point of view I can tell you it seemed like a lifeline to have some downward pressure on the aussie dollar (as this tax did) as well as a small decrease in tax rates. As mining heats up it becomes more difficult to operate any other export business because of increased exchange rates and pressure on wages. The danger is that we will become over-reliant on mining as it tends to squeeze out other export industries.
- brc 16y ago
  I'm in the same boat as you - the high AUD is killing my profitability - 30% revenue fall in 2 years. However, I don't condone this type of government action just to make my life easier. Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it. If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.
  - dejb 16y ago
    > I don't condone this type of government action just to make my life easier It is certainly easy to have one's opinions shaped by personal circumstances. But do you really think that Australia's long term future will be best served by relying on our minerals rather than our minds? It's like the economy is telling us 'this information economy stuff is all rather nice but the best thing you could be doing now is figuring out how to find and extract minerals from the ground'. I don't happen to agree but could you honestly recommend a comp sci degree over metallurgy to a financially ambitious school leaver? A heavy reliance on minerals and therefore on our relationship with China seems fraught with danger. Politically speaking, mining requires 'stability' where as the information economy seems to require democracy and freedom. All income is not equal. > Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it. It seems to me that the value of the minerals is not in danger of disappearing any time soon. So I don't really see the frantic need for us to sell it as soon as it can be economically extracted. Are we really so badly off that we need the money as soon as we can get it? Unemployment is 5%. To me the danger is that are we becoming so addicted to this revenue source that when our dealer stops supplying we won't be able to cope. > If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore. You must be from WA :) Seriously though I'm not sure about the best mechanism but I think this is a situation where the pure free market could become a tragedy of the commons.

by brc 16y ago

teyc 16y ago

Not quite. Given the price rises, the shareholders would be better off if they just sat on their leases and paid a capital gain. However, there are laws against that too. I believe government policy needs to consider resources are finite. The tragedy of the commons that is being played out at the moment prices the resouces at $0 for the future generation. Just like the way we are pricing fisheries. It is insane.

nl 16y ago

There were other factors at work with Rudd's removal. The mining tax was the last act in a long play of dropping promises, reneging on commitments and policy backflips. I agree with this The mining tax was a disaster and, in it's original form, was reverse nationalism by stealth. The government was going to tax profits above 6% with a 40% 'super tax' - terminology straight from a Marxist script. They were then going to reimburse Miners for losses on projects. In reality, with the government participating in 40% of the profits and 40% of the losses, it was a part-nationalisation by stealth. I agree the mining tax was a disaster, but it wasn't as bad as you are making out. The 40% thing was always something that got the headlines, but as you point out it isn't as simple as that because it would have reduced state based royalties. The reason the mining tax was so rejected, particularly by the mining states, was that it was to replace state-based mining royalties with a Federal mining tax. This is true. The mineral states stood to lose power over their own revenues, and the non-mining states stood to gain income from activities that took place entirely outside their borders. This is also true, but not necessarily a bad thing. Australian urban centres are a long, long way from the mines and some form of distribution probably makes sense. The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else. I don't think the tax was loved by anyone except Rudd's kitchen cabinet (and possibly only by 3 out of them too, judging from how quickly Gillard backed off it). But the goals of the tax are perhaps more broadly backed. The original article touched on the fact that many mining companies avoid investing in the communities (as you'd expect from a profit making entity), and this has caused some issues. From the article: One of the local councils in the Pilbara, Shire of Ashburton, recently refused permission to Rio Tinto to expand its camp around the Tom Price mine. Instead the company has been asked to invest in facilities that will remain after the mine is closed, to spend $247 million on housing, an air strip, and other infrastructure at the town of Pannawonica. This kind of investment, and the employing of locals, is the only move that is going to convince skeptics like Tony Wiltshire. "We were at a town meeting the other day when a representative from a mining company said, 'Come on, we're all up here to make a dollar.' The locals in the room looked at each other and thought, 'What?' We live here. We can cope with the hot summers. We're here for the long term. We are actually better for the multinationals than the contractors they fly in and fly out. We just need them to wake up to the fact that they, and we, are all in it for the long haul." The idea of the tax was to formalize this kind of investment. The way they went about it was probably the worst planned example of domestic politics in Australia since WW2, though!

megablast 16y ago
The tax was a great idea, and only hated by mining companies and people who happened to believe everything they see on TV. Most other big mining countries (Canada, Brazil, etc...) are also thinking about bringing in a mining tax like this. All Australians deserve returns from the investment, not just the tiny number of miners, who earn ridiculous sums of money.
- ShardPhoenix 16y ago
  If more people were willing to do those mining jobs, they wouldn't make so much money.
  - nl 16y ago
    I think he meant the tiny number of mining companies which make all the money - not the small number of employees who make good but not outrageous money.
- deleted 16y ago
  [deleted]
brc 16y ago
If there was some broad-based, phased-in, mineral based price tax/royalty that went into an untouchable, national sovereign wealth fund, then I would agree in-principle to a resources rent tax. As for the regional areas investment, I broadly think that the royalties-for-regions that has been implemented in WA is the way to increase regional investment. What I do not agree with, is taxing the profits of one industry to fill up general revenue lost through bad government spending. You might support it now, but once the pattern is established, any industry might be next, just for doing too well. And that's a bad principle, and against all concepts of fairness and equity. If the government wants more tax money from mining, then they should go to the miners and say 'where can we invest to lower your cost of capital, increase your productivity and increase your competitiveness on the world market'. You'd get double the amount of taxes from a doubling in size of the mining companies, and a lot more employment, to boot.

dejb 16y ago

> The tax was beloved by pro-government tax-raising types and lovers of economic theory and hated by pretty much everyone else. From a 'web startup' point of view I can tell you it seemed like a lifeline to have some downward pressure on the aussie dollar (as this tax did) as well as a small decrease in tax rates. As mining heats up it becomes more difficult to operate any other export business because of increased exchange rates and pressure on wages. The danger is that we will become over-reliant on mining as it tends to squeeze out other export industries.

brc 16y ago
I'm in the same boat as you - the high AUD is killing my profitability - 30% revenue fall in 2 years. However, I don't condone this type of government action just to make my life easier. Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it. If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore.
- dejb 16y ago
  > I don't condone this type of government action just to make my life easier It is certainly easy to have one's opinions shaped by personal circumstances. But do you really think that Australia's long term future will be best served by relying on our minerals rather than our minds? It's like the economy is telling us 'this information economy stuff is all rather nice but the best thing you could be doing now is figuring out how to find and extract minerals from the ground'. I don't happen to agree but could you honestly recommend a comp sci degree over metallurgy to a financially ambitious school leaver? A heavy reliance on minerals and therefore on our relationship with China seems fraught with danger. Politically speaking, mining requires 'stability' where as the information economy seems to require democracy and freedom. All income is not equal. > Continued foreign investment in high risk mining activities is good for the country, and this was going to stop it. It seems to me that the value of the minerals is not in danger of disappearing any time soon. So I don't really see the frantic need for us to sell it as soon as it can be economically extracted. Are we really so badly off that we need the money as soon as we can get it? Unemployment is 5%. To me the danger is that are we becoming so addicted to this revenue source that when our dealer stops supplying we won't be able to cope. > If anything was to be done then the state-based mining royalties should have had some component to adjust with the price of the underlying ore. You must be from WA :) Seriously though I'm not sure about the best mechanism but I think this is a situation where the pure free market could become a tragedy of the commons.