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2010-05-27

Is Henry kidding himself and the nation?

Comment on report "Mining super-profits tax won't hit cost of living, Ken Henry tells Senate estimates", by Samantha Maiden of the Australian, 27/05/2010, http://www.theaustralian.com.au/business/in-depth/mining-super-profits-tax-wont-hit-cost-of-living-ken-henry-tells-senate-estimates/story-fn5eo6td-1225871907112

Dr Henry says he had learned in high school that a “profits-based tax should not affect prices" (see the report belwo).

Was that underlying the design of the company taxes especially the mineral tax in his tax review report and the government's super resource profit tax?

Isn't it ridiculous misunderstanding of economics, businesses and taxation?



Does he really believe that businesses don’t pass on any of profit tax to consumers in a country?

Just imagine that capital is taxed just like businesses have to pay 90% of profit tax in a country and no tax in all other countries. Does De Henry really mean that businesses profitability after tax in this country would be only 10% of businesses in all other countries?

Is that what Dr Henry implies?

Businesses will pass some of the profit tax, though not as much as a sales tax, on to consumers.

His high school economics knowledge, unfortunately, is not good and far from enough on this matter!

He has exposed himself clearly and shown that unambiguously!

It is a pity that Australia has this person as the secretary of its Treasury department in charge of economic policies.

Poor, poor!


The following is the report:
TREASURY secretary Ken Henry has rubbished Tony Abbott's claims that the government's mining super profits tax would raise the cost of living.


And he has also dimissed assertions that resources companies saved Australia from recession, telling a Senate hearing that if the nation had followed the pattern of mining job losses it would have had an unemployment rate of 19 per cent.
Dr Henry is appearing before the Senate estimates hearing in Canberra this morning where he is being quizzed on the Rudd government's resource super profits tax, which he helped design through his work on the Henry tax review.
Asked about the Opposition leader's claim that the tax would hit the cost of living, Dr Henry said he had learned in high school that a “profits-based tax should not affect prices.”
“Prices should not be affected,” he said.
He also said the mining industry had actually experienced quite a deep recession, undermining claims it had saved the nation from the global financial crisis.


“I've heard it said on a number of occasions, in fact I have lost count, that the mining industry saved Australia from recession,” Dr Henry told the hearing.
“These statements are not supported by the facts.”
In fact, he said, the mining industry had shed 15 per cent of jobs in the wake of the GFC.
“Had every industry in Australia behaved in the same way our unemployment would increase from 4.6 per cent to 19 per cent in six months,” he said.
Earlier this month, Liberal frontbencher Julie Bishop criticised the government's mining tax arguing it would hurt the industry that helped Australia the most during the GFC.
“Kevin Rudd likes to say that he saved Australia from the global financial crisis. In fact it wasn't his pink batt scheme or his scandalous school building program that saved us from the recession. It was the mining sector that continued to export our resources to booming economies like China,” she told Sky News on May 4.


This morning, the top public servant has also been asked about a front-page story in The Australian flagging a likely concession by the government in which it would lift the threshold definition of a super profit from 6 per cent to 12 per cent. This would be offset by removing the 40 per cent write-off for failed projects.
Dr Henry said he had no information to date that the government was considering any changes such that would affect the Rudd government's timetable to surplus by 2013.
If no offsetting decision was made it would effect the budget bottom line he conceded, but this was a “very big if”.
He also took aim at figures promoted by the Minerals Council of Australia suggesting mining companies are subjected to a much higher effective tax rate than the 17 per cent nominated by Wayne Swan when generous deductions are taken into account.
And he has also suggested a proposed rise in the superannuation guarantee from 9 to 12 per cent for workers to be paid by employers would come out of wages, not profits, suggesting the reforms will affect families' take home pay.

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