Comments on Miranda Stewart "Ideas for Australia: Five ideas to help fix Australia’s tax system", 11/04/2016
While many points in the post are probably valid and good, some points are debatable.Firstly, in terms of income tax, why not consider a flat or much flatter tax structure to simplify the current income tax?
This is particularly in the context where the author also argued for broadening the GST base to cover everything and to increase the rate to 12.5%. To do that with the GST is not too different to have a flat income tax.Secondly, company income tax rate, there should be a debate what is best in terms of the tax rate.
I personally have significant doubt on the often argued benefits of lowering company tax rate, notwithstanding the capital mobility argument.The argument on tax on superannuation contribution is highly questionable and dubious, particularly in terms of using individual’s marginal tax rate.
The argument on negative gearing is also questionable. So much for now and may comment further down the track.
For the universal paid parental leave of 6 months and universal childcare for those who working, what would be the pay rate for the mothers or fathers for that matter, and what level of assistance for universal childcare from the government using taxpayers' money? The rates are the key and without appropriate rates such talks are pointless.
Further, the equal share in both personal income tax and the GST between the federal and state governments may give too much revenue to the states. And yes, any increase from the current federal revenue to the states should definitely contingent on the states to abolish some the most inefficient taxes.
The states have not delivered the promise or requirement as specified in the inter-governmental agreement for the GST. As a result, the public is justified to be suspicious of promise to abolish taxes without actions undertaken.
The relative shares of income tax and the GST should be based on some objective measures in terms of services and other obligations of each levels of government and should not left to the politicians alone. There should be an independent body to decide that, or to have referendums to decide.
Income tax should be indexed to the total income level, so the the ratio of total tax revenue to the income is virtually fixed. Again, if there is a need to increase tax, let referendum, that is, the voters to decide.
PS: in reply to comments on the first part of my comments by Robert:
"Lincoln, I don’t know about you, but for the last 50 years my taxation has been calculated by a computer, and automatically deducted and passed on to the ATO - again by a computer.
I have never once been fussed by a regressive or progressive tax calculation. Computers can handle any of them. The real issue is whether you think taxes should be paid by those who can afford them, or by those who cannot.
As to the GST, yes, it is a flat tax applied to pretty much whatever you chose to spend your after-tax income - unless you are rich, of course, in which case the tax you pay is pretty much voluntary.
You need to be more specific in your comments."
Robert, please see more comments from me below that may clear some of your questions. Progressive taxes are more than for high income earners to pay more taxes, they are paying proportionately more from their income. A flat tax means the more one earns the more tax they would pay.
Showing posts with label company taxation. Show all posts
Showing posts with label company taxation. Show all posts
2011-03-30
MRRT, company tax cuts and personal taxpayers
Comments on Rob Burgess “We need better taxes, not bigger taxes”, 30/03/2011, http://www.businessspectator.com.au/bs.nsf/Article/tax-reform-Bob-Brown-revenue-MRRT-mining-tax-pd20110330-FES3V?OpenDocument&src=rot
This article seems like a confused argument that may cause more confusions.
In terms of the relative position of Australian company tax rate, the article appears self defeating but refused to concede that it might be a case that it does not need to be lowered at present.
In terms of impact of mining and higher $A on the tax revenue from other businesses, the article lacks a coherent and consistent logic too.
If the tax revenue from other businesses were to fall by mining boom and high $A, then further lower the company tax rate will do nothing to keep the government budget unaffected or neutral or its integrity.
Even from equity point of view between business and labour, the argument for reducing the company tax rate only stacks up if businesses are indeed have to provide higher superannuation for employees without effectively lower employees wages or slowing the growth of them, so all taxpayers benefit from a lower company tax rate. There is no guarantee that employees will not be negatively affected or worse off in that process.
If it is to consider the future, then there is a strong point not to lower the company tax rate and instead to put the MRRT into a future fund.
To conclude, while it has been taken as a faith to lower company tax rate, the arguments in this article are not convincing.
Having said that, I find some attraction from its title.
This article seems like a confused argument that may cause more confusions.
In terms of the relative position of Australian company tax rate, the article appears self defeating but refused to concede that it might be a case that it does not need to be lowered at present.
In terms of impact of mining and higher $A on the tax revenue from other businesses, the article lacks a coherent and consistent logic too.
If the tax revenue from other businesses were to fall by mining boom and high $A, then further lower the company tax rate will do nothing to keep the government budget unaffected or neutral or its integrity.
Even from equity point of view between business and labour, the argument for reducing the company tax rate only stacks up if businesses are indeed have to provide higher superannuation for employees without effectively lower employees wages or slowing the growth of them, so all taxpayers benefit from a lower company tax rate. There is no guarantee that employees will not be negatively affected or worse off in that process.
If it is to consider the future, then there is a strong point not to lower the company tax rate and instead to put the MRRT into a future fund.
To conclude, while it has been taken as a faith to lower company tax rate, the arguments in this article are not convincing.
Having said that, I find some attraction from its title.
2011-03-29
A potential structural deficit in using MRRT to fund company tax cuts
Comments on Joe Kelly “Industry attacks Greens vow to oppose company tax cuts”, 29/03/2011, http://www.theaustralian.com.au/national-affairs/industry-attacks-greens-vow-to-oppose-company-tax-cuts/story-fn59niix-1226029856403
Leaving aside whether the Australian company tax is international competitive or not, the tax cuts to company tax rates MAY ACTUALLY COST more than the MRRT would collect.
Remember that there are reports that the big three mining that did the deal MRRT with Gillard might not believe the MRRT would collect as much as Treasury study forecast? They are big companies and it's their money at stake, so they were unlikely to have made a mistake in their calculation. I'd bet they were/are correct.
Further, remember Treasury's number changes in the tax revenue estimates between Rudd's SPRT and Gillard's MRRT? It was suspicious then and it is still suspicious now. It looked like a joke and it has been one.
If an independent audit was done for the Treasury estimates, it would shed some light on the issue.
All they suggest is that the MRRT will not collect the amount of revenue that the Gillard government has been saying.
Leaving aside whether the Australian company tax is international competitive or not, the tax cuts to company tax rates MAY ACTUALLY COST more than the MRRT would collect.
Remember that there are reports that the big three mining that did the deal MRRT with Gillard might not believe the MRRT would collect as much as Treasury study forecast? They are big companies and it's their money at stake, so they were unlikely to have made a mistake in their calculation. I'd bet they were/are correct.
Further, remember Treasury's number changes in the tax revenue estimates between Rudd's SPRT and Gillard's MRRT? It was suspicious then and it is still suspicious now. It looked like a joke and it has been one.
If an independent audit was done for the Treasury estimates, it would shed some light on the issue.
All they suggest is that the MRRT will not collect the amount of revenue that the Gillard government has been saying.
2011-01-20
No new tax please!
Comments on Ben Packham “Coalition revives 'great big new tax' slogan as it urges Gillard not to impose floods levy”, 20/01/2011, http://www.theaustralian.com.au/in-depth/queensland-floods/coalition-revives-great-big-new-tax-attack-as-it-urges-gillard-not-to-impose-floods-levy/story-fn7iwx3v-1225991733800
Leaving the politics aside, there is no need to bring in any levy to deal with the rebuilding.
It would be ridiculous to lower business taxes and at the same time to make new levies on personal taxpayers.
Unfortunately most governments just do not regard the public seriously because they don't have a strong voice as those represented by special interest groups do, so personal taxpayers always find they are on the receiving end of any increased tax bills.
Taxpayers pay enough tax and the government has enough money to do what is required them to do – it is only a matter of cash flow management using borrowing and repaying debt as the means to achieve so.
Any argument or even thinking of a levy now would show how incompetent of the government could be in managing its budget: there can and will always be something unexpected to occur and it would be ridiculous for a government to simply bring in a new tax, levy or charge whenever there they occur.
Leaving the politics aside, there is no need to bring in any levy to deal with the rebuilding.
It would be ridiculous to lower business taxes and at the same time to make new levies on personal taxpayers.
Unfortunately most governments just do not regard the public seriously because they don't have a strong voice as those represented by special interest groups do, so personal taxpayers always find they are on the receiving end of any increased tax bills.
Taxpayers pay enough tax and the government has enough money to do what is required them to do – it is only a matter of cash flow management using borrowing and repaying debt as the means to achieve so.
Any argument or even thinking of a levy now would show how incompetent of the government could be in managing its budget: there can and will always be something unexpected to occur and it would be ridiculous for a government to simply bring in a new tax, levy or charge whenever there they occur.
2010-06-12
Dump the Treasurer and the RSPT and change tactics
Comments on Paul Kelly “Cornered by his own trap”, 12/06/2010, http://www.theaustralian.com.au/news/opinion/cornered-by-his-own-trap/story-e6frg6zo-1225878635983
The only feasible way solution is to acknowledge that the announced RSPT is flawed and attribute the flaws to its designer, the Henry tax review to distance the government from it or at least to create an acceptable excuse for the government, so it can have some room to manoeuvre and turn its political fortune around.
Either the PM, or the Treasurer should take full responsibility for that, although it is more likely that the Treasurer should, give that the RSPT has been the product of his department.
Then the next step is to replace the RSPT with a similar PRRT and call it MRRT that exempts all existing mining production.
Some other details such as the relationship between the existing state royalties and the federal MRRT can be worked out in negotiations over the next months.
In the media and longer run, the PM needs to change his style of leadership and replace his key advisors.
He needs to be more trustful to other cabinet colleagues. The over centralisation and control freak never work well on very broad tasks like the running a country.
He needs to have more practical advisors with workable policies and policy solutions. The idea to have people work dog years is never to be admired or adopted.
Failing to do that, he has no options by to pass the leadership to another person after the next election.
The only feasible way solution is to acknowledge that the announced RSPT is flawed and attribute the flaws to its designer, the Henry tax review to distance the government from it or at least to create an acceptable excuse for the government, so it can have some room to manoeuvre and turn its political fortune around.
Either the PM, or the Treasurer should take full responsibility for that, although it is more likely that the Treasurer should, give that the RSPT has been the product of his department.
Then the next step is to replace the RSPT with a similar PRRT and call it MRRT that exempts all existing mining production.
Some other details such as the relationship between the existing state royalties and the federal MRRT can be worked out in negotiations over the next months.
In the media and longer run, the PM needs to change his style of leadership and replace his key advisors.
He needs to be more trustful to other cabinet colleagues. The over centralisation and control freak never work well on very broad tasks like the running a country.
He needs to have more practical advisors with workable policies and policy solutions. The idea to have people work dog years is never to be admired or adopted.
Failing to do that, he has no options by to pass the leadership to another person after the next election.
2010-05-29
Who is guilty in the RSPT war?
Comments on George Megalogenis “Shrill leaders bicker”, 29/05/2010, http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/shrill_leaders_bicker/
GM makes the matter like that every side is equally bad and no sides are good or better. That itself is a problem, isn't it?
On this particular matter of RSPT, the Rudd government is clearly the guilty side, becoming more so by spending taxpayers' money on advertising.
Miners are justified in their actions for a just right to be taxed fairly.
GM's analysis is a bit speculative and suffers from a narrow and selfish perspective, that is, no matter government does, it has the rights and can be justified.
That put the government above everyone. Is that right? The answer is definitely no.
It should be noted that it is that very line of thinking among some Australians that is the very environment that some government is so irresponsible, arbitrary and wayward, and in gross contempt of the taxpayers.
Of course, it is true that the opposition is also guilty in some areas, like the resorting to the “pacific solution”.
But the miners are different to the two political parties in the current state of affairs.
GM makes the matter like that every side is equally bad and no sides are good or better. That itself is a problem, isn't it?
On this particular matter of RSPT, the Rudd government is clearly the guilty side, becoming more so by spending taxpayers' money on advertising.
Miners are justified in their actions for a just right to be taxed fairly.
GM's analysis is a bit speculative and suffers from a narrow and selfish perspective, that is, no matter government does, it has the rights and can be justified.
That put the government above everyone. Is that right? The answer is definitely no.
It should be noted that it is that very line of thinking among some Australians that is the very environment that some government is so irresponsible, arbitrary and wayward, and in gross contempt of the taxpayers.
Of course, it is true that the opposition is also guilty in some areas, like the resorting to the “pacific solution”.
But the miners are different to the two political parties in the current state of affairs.
2010-05-25
Who are telling the truth and who are telling lies?
Comments on Agencies “Ken Henry a gun for hire, say Coalition”, 25/05/2010, http://www.theaustralian.com.au/politics/ken-henrys-mining-tax-figures-cant-be-trusted-coalition/story-e6frgczf-1225870939831
The reports says “FEDERAL coalition MPs have unleashed a savage attack on the credibility of Treasury boss Ken Henry saying he can't be trusted on figures showing the amount of tax mining companies pay.
The federal government yesterday released a Treasury minute showing mining companies paid an effective company tax rate of just 17 per cent during the decade to 2004/05. That's 12 per cent below the average rate for all industries.
The minute was released after the opposition produced tax office figures showing miners paid an effective rate of 27.8 per cent.”
What is the real and hard truth?
Some report appears to say that Treasury used the figures from the US source.
It is unbelievable that mining companies could only pay 13-17% tax, if the company tax rates were 30 or higher.
Does that mean the ATO has not done its job properly?
Somewhere people are talking different things, and compare apples with oranges.
So both politicians and bureaucrats need to tell the true and should not spin for own particular purposes.
This has been a serious problem in Australia and Australian federal politics - very simple matters can be highly distorted and endless political spins can be generated to serve own political purposes, and with no legal constraints or punishment.
Democracy is decay, or the quality of politics in Australia is so incredibly low!
The reports says “FEDERAL coalition MPs have unleashed a savage attack on the credibility of Treasury boss Ken Henry saying he can't be trusted on figures showing the amount of tax mining companies pay.
The federal government yesterday released a Treasury minute showing mining companies paid an effective company tax rate of just 17 per cent during the decade to 2004/05. That's 12 per cent below the average rate for all industries.
The minute was released after the opposition produced tax office figures showing miners paid an effective rate of 27.8 per cent.”
What is the real and hard truth?
Some report appears to say that Treasury used the figures from the US source.
It is unbelievable that mining companies could only pay 13-17% tax, if the company tax rates were 30 or higher.
Does that mean the ATO has not done its job properly?
Somewhere people are talking different things, and compare apples with oranges.
So both politicians and bureaucrats need to tell the true and should not spin for own particular purposes.
This has been a serious problem in Australia and Australian federal politics - very simple matters can be highly distorted and endless political spins can be generated to serve own political purposes, and with no legal constraints or punishment.
Democracy is decay, or the quality of politics in Australia is so incredibly low!
John Ralph on the RSPT
Comments on John Ralph "Retrospective tax a risk to national sovereignty", 25/05/2010, http://www.theaustralian.com.au/news/opinion/retrospective-tax-a-risk-to-national-sovereignty/story-e6frg6zo-1225870760693
Now the PM, Treasurer, government ministers, as well as Treasury officials should take a note of what Ralph has to say on the RSPT, modelling assumptions and model logic.
The article is quoted as below for my future reference:
"HAVING retired from corporate life I am reluctant to become involved in the present debate about proposed tax measures, but I am perplexed about the apparent lack of understanding by the commonwealth government of the long-term damage they are about to inflict on the Australian community if the proposed resource super-profits tax is implemented as planned. Governments can increase or decrease tax rates and, while these changes will have an effect on future investment decisions, they do not affect the external perception of the nation's standing in relation to sovereign risk.
Prudent management will have assessed the sensitivity of a project's viability and attractiveness to a change in tax rates in making its investment decisions.
A decision to impose a 40 per cent tax rate on earnings above the bond rate will reduce future investment because of the substantive effect on projected after tax returns. Projects that promised to meet, or just exceed, the company's cost of capital without the new tax would not do so with the new tax, and so would not proceed. Only those projects with a very high projected return would proceed. A suggestion that an increase in taxation would result in an increase in investment could only be made by somebody not living in the real world.
If a computer model predicts this, then the assumptions on which the model is based need to be re-examined. As always with computers, remember GIGO (garbage in, garbage out).
There clearly seems to be a fundamental misunderstanding that the prospect of a refund of 40 per cent when a project fails or makes losses will make a project more financially attractive to undertake. The expected after tax return from a project being considered for investment will largely determine whether the project proceeds. Projects are not undertaken when losses or failure are expected. Knowing that part of a loss will be underwritten by government if the project fails, does not do anything to improve the after tax return when the project does not fail. Consequently, the imposition of the additional tax burden will reduce expected returns and, therefore, reduce investment at all levels in the industry.
There will, of course, be some offsets in the resulting lower value in the Australian dollar for exporters accounting and reporting in Australian dollars, but an increase in import costs, with implications for inflation.
An additional fallout that can be expected will be that a reduction in investment attractiveness will almost certainly result in a lower level of exploration activity. Why would companies be expected to retain a high commitment to exploration if there are likely to be fewer viable projects?
All of the above considerations relate to the fact that there will be consequences for investment and jobs from changes in tax arrangements. Provided it understands the implications, this is a matter for government to weigh up and decide if it wishes to trade off future investment and jobs in the mining and associated industries for an immediate increase in revenue.
The aspect of the proposed arrangements that is of most concern to me, however, and should be to most Australians, is the retrospective nature of the proposed tax in applying it to existing operations. This will heighten significantly the sovereign risk assessment of Australia when it comes to investment in, and lending to, Australian entities.
This changed assessment of risk will be priced into transactions and make borrowing more expensive for a country very dependent on foreign capital. This will affect all Australians. One only has to look at what is happening in Greece, admittedly a more extreme case, to appreciate how heightened sovereign risk increases borrowing costs and limits access to funds. The Hawke government clearly appreciated this issue of sovereign risk when it introduced the resource rent tax on petroleum, by not applying it retrospectively.
Whether an individual, a company or a country, reputations take a long time to build but they can be tarnished or destroyed in an instant and, once lost, take a long time to rebuild. If the sovereign risk assessment of Australia is downgraded from the strong position the nation has enjoyed for many decades, it will take a long time for this perception to change. The precedent will have been seen to have been set and investors and lenders will be questioning for some time where next may retrospectivity be applied? They will reflect this in their pricing decisions affecting Australia.
It is this risk to the nation's standing in relation to sovereign risk that concerns me most because of its long-term adverse implications for the Australian community."
John Ralph AC was formerly chief executive of CRA, a director of BHP Billiton and chairman of the Commonwealth Bank, former president of the Business Council of Australia and chairman of the Ralph report into corporate tax reform.
Now the PM, Treasurer, government ministers, as well as Treasury officials should take a note of what Ralph has to say on the RSPT, modelling assumptions and model logic.
The article is quoted as below for my future reference:
"HAVING retired from corporate life I am reluctant to become involved in the present debate about proposed tax measures, but I am perplexed about the apparent lack of understanding by the commonwealth government of the long-term damage they are about to inflict on the Australian community if the proposed resource super-profits tax is implemented as planned. Governments can increase or decrease tax rates and, while these changes will have an effect on future investment decisions, they do not affect the external perception of the nation's standing in relation to sovereign risk.
Prudent management will have assessed the sensitivity of a project's viability and attractiveness to a change in tax rates in making its investment decisions.
A decision to impose a 40 per cent tax rate on earnings above the bond rate will reduce future investment because of the substantive effect on projected after tax returns. Projects that promised to meet, or just exceed, the company's cost of capital without the new tax would not do so with the new tax, and so would not proceed. Only those projects with a very high projected return would proceed. A suggestion that an increase in taxation would result in an increase in investment could only be made by somebody not living in the real world.
If a computer model predicts this, then the assumptions on which the model is based need to be re-examined. As always with computers, remember GIGO (garbage in, garbage out).
There clearly seems to be a fundamental misunderstanding that the prospect of a refund of 40 per cent when a project fails or makes losses will make a project more financially attractive to undertake. The expected after tax return from a project being considered for investment will largely determine whether the project proceeds. Projects are not undertaken when losses or failure are expected. Knowing that part of a loss will be underwritten by government if the project fails, does not do anything to improve the after tax return when the project does not fail. Consequently, the imposition of the additional tax burden will reduce expected returns and, therefore, reduce investment at all levels in the industry.
There will, of course, be some offsets in the resulting lower value in the Australian dollar for exporters accounting and reporting in Australian dollars, but an increase in import costs, with implications for inflation.
An additional fallout that can be expected will be that a reduction in investment attractiveness will almost certainly result in a lower level of exploration activity. Why would companies be expected to retain a high commitment to exploration if there are likely to be fewer viable projects?
All of the above considerations relate to the fact that there will be consequences for investment and jobs from changes in tax arrangements. Provided it understands the implications, this is a matter for government to weigh up and decide if it wishes to trade off future investment and jobs in the mining and associated industries for an immediate increase in revenue.
The aspect of the proposed arrangements that is of most concern to me, however, and should be to most Australians, is the retrospective nature of the proposed tax in applying it to existing operations. This will heighten significantly the sovereign risk assessment of Australia when it comes to investment in, and lending to, Australian entities.
This changed assessment of risk will be priced into transactions and make borrowing more expensive for a country very dependent on foreign capital. This will affect all Australians. One only has to look at what is happening in Greece, admittedly a more extreme case, to appreciate how heightened sovereign risk increases borrowing costs and limits access to funds. The Hawke government clearly appreciated this issue of sovereign risk when it introduced the resource rent tax on petroleum, by not applying it retrospectively.
Whether an individual, a company or a country, reputations take a long time to build but they can be tarnished or destroyed in an instant and, once lost, take a long time to rebuild. If the sovereign risk assessment of Australia is downgraded from the strong position the nation has enjoyed for many decades, it will take a long time for this perception to change. The precedent will have been seen to have been set and investors and lenders will be questioning for some time where next may retrospectivity be applied? They will reflect this in their pricing decisions affecting Australia.
It is this risk to the nation's standing in relation to sovereign risk that concerns me most because of its long-term adverse implications for the Australian community."
John Ralph AC was formerly chief executive of CRA, a director of BHP Billiton and chairman of the Commonwealth Bank, former president of the Business Council of Australia and chairman of the Ralph report into corporate tax reform.
Megalogenis helpless or Meganomics unhelpful
Comments on George Megalogenis “Mining the figures uncovers deception”, 25/05/2010, http://blogs.theaustralian.news.com.au/meganomics/index.php/theaustralian/comments/mining_the_figures_uncovers_deception/
While George Megalogenis has apparently attempted to clear the air in the debate, he unfortunately and actually has added more confusions and had produced an effect of misleading.
His claim that "Mining is taxed less than most other sectors when it comes to corporate tax" missed the point of the big picture of distortions in the debate, that is, the Treasurer and government ministers have used 13-17% as the effective tax rate for mining.
Swan's distortion is 10 times worse than the point George Megalogenis is making.
So is George Megalogenis trying to help, or trying to help one side in the distorted debate?
While George Megalogenis has apparently attempted to clear the air in the debate, he unfortunately and actually has added more confusions and had produced an effect of misleading.
His claim that "Mining is taxed less than most other sectors when it comes to corporate tax" missed the point of the big picture of distortions in the debate, that is, the Treasurer and government ministers have used 13-17% as the effective tax rate for mining.
Swan's distortion is 10 times worse than the point George Megalogenis is making.
So is George Megalogenis trying to help, or trying to help one side in the distorted debate?
2010-05-23
Bizarre logic by the government
Media reports that both Gillard and Swan state that multinational mining companies like BHP and Rio Tinto only pay 13% effective company tax rate. See “Mining companies pay only 13% tax: Gillard”, 23/05/2010, http://www.smh.com.au/national/mining-companies-pay-only-13-tax-gillard-20100523-w3gg.html
The report starts:
The federal government has opened a new front of attack against miners in the fight over the proposed resource rent tax, saying multinationals such as BHP Billiton and Rio Tinto pay just 13 per cent tax.
Deputy Prime Minister Julia Gillard says the low effective company tax rate proves big mining companies can afford to pay more.
"These are the cold, hard facts - the truth," she told the Nine Network.
Domestic mining companies pay an effective company tax rate of just 17 per cent, Ms Gillard said.
"For the overseas companies, the multinationals, (it's) around 13 per cent.
"This is not a fair share and that's why we're moving to introduce the resources super-profits tax."
The claim seems ridiculers. If it is true, then why the Australian government has allowed that to happen?
It appears to demonstrate how desperate the government has become.
The report starts:
The federal government has opened a new front of attack against miners in the fight over the proposed resource rent tax, saying multinationals such as BHP Billiton and Rio Tinto pay just 13 per cent tax.
Deputy Prime Minister Julia Gillard says the low effective company tax rate proves big mining companies can afford to pay more.
"These are the cold, hard facts - the truth," she told the Nine Network.
Domestic mining companies pay an effective company tax rate of just 17 per cent, Ms Gillard said.
"For the overseas companies, the multinationals, (it's) around 13 per cent.
"This is not a fair share and that's why we're moving to introduce the resources super-profits tax."
The claim seems ridiculers. If it is true, then why the Australian government has allowed that to happen?
It appears to demonstrate how desperate the government has become.
2010-05-06
ALP state Treasurer: Rudd proposed tax on mining profits 'flawed'
Comments on ABC report "Rudd proposed tax on mining profits 'flawed': Fraser", 6/05/2010, http://www.abc.net.au/news/stories/2010/05/06/2892069.htm?section=justin
I have earlier commented the difficulties of defining super profits for mining companies in modern times.
Now the Queensland Labour government Treasurer, Andrew Fraser has said the super mining profit tax proposal has flaws, although he also said that "But I think if we work closely with industry as governments then you can get a design that protects investment and promotes jobs."
Note that the federal government is ALP.
I have earlier commented the difficulties of defining super profits for mining companies in modern times.
Now the Queensland Labour government Treasurer, Andrew Fraser has said the super mining profit tax proposal has flaws, although he also said that "But I think if we work closely with industry as governments then you can get a design that protects investment and promotes jobs."
Note that the federal government is ALP.
2010-05-05
Does mining super profit exist?
Comments on Paul Kelly “Modest tax reform with an eye to election”, 5/05/2010, http://www.theaustralian.com.au/news/opinion/modest-tax-reform-with-an-eye-to-election/story-e6frg6zo-1225862266146
The concept of super profit and super profit tax is questionable.
If ownership of the investors of mining companies is the same from start to now, then the concept seems fine.
But modern mining is generally characterised by public companies such as BHP and Rio, so their shares are traded and some investors would have paid more than the book values of those companies. To those latter investors, there is hardly any super profit for them, because if there is, other investors will buy the stocks and push the share price higher until there is no super profit after adjusting for differences in risks with other industries.
In such a context, the super profit hardly exists and impossible to define.
If the government is to go ahead with that super mining profit tax, then it will result in investment flight out of mining stocks to other stocks, lower their share prices and reduce investment in mining in Australia.
Australians will be worse off as mining production is affected, and the perceived super profit dissipates and little super profit tax revenue collected.
While the naive and static analysis by some Treasury officials and economists apparently appears fine, but it in reality hardly works.
We will see another tax design failure on a grand scale, just as the Reagan's policy design of lower tax rate to increase total tax revenue in the US based on the concept of the Laffer tax curve.
The concept of super profit and super profit tax is questionable.
If ownership of the investors of mining companies is the same from start to now, then the concept seems fine.
But modern mining is generally characterised by public companies such as BHP and Rio, so their shares are traded and some investors would have paid more than the book values of those companies. To those latter investors, there is hardly any super profit for them, because if there is, other investors will buy the stocks and push the share price higher until there is no super profit after adjusting for differences in risks with other industries.
In such a context, the super profit hardly exists and impossible to define.
If the government is to go ahead with that super mining profit tax, then it will result in investment flight out of mining stocks to other stocks, lower their share prices and reduce investment in mining in Australia.
Australians will be worse off as mining production is affected, and the perceived super profit dissipates and little super profit tax revenue collected.
While the naive and static analysis by some Treasury officials and economists apparently appears fine, but it in reality hardly works.
We will see another tax design failure on a grand scale, just as the Reagan's policy design of lower tax rate to increase total tax revenue in the US based on the concept of the Laffer tax curve.
2010-05-03
WA reaction critical
Given the Australian government's initial response to its commissioned Henry tax review is to impose a 40% super profit tax on mining companies to fund its other commitments, the implications are to be felt by many gradually.
The most significant implication of this tax impost is its geographically differential impact. The states with large mining production will bear the brunt of this tax, while other states with little or no tax will be big winners.
As a result, it can be expected that the reactions across the nation are likely to be very different.
Compare West Australia with the ACT, for example. WA is the largest mining state in Australia, with abundant minerals deposits, such as iron ore, etc. It has been the engine room for the mining boom associated with the China boom. So the mining companies operating in WA will be hit by the proposed new super profit tax. The consequences are likely to be big the share prices of mining companies will fall due to reduced profits for their shareholders as compared to the case with no such taxes. New mining investments are also likely to not grow as much as otherwise. This will have an employment effect in terms of both numbers and wages.
On the other hand, the ACT does not have mining production. This tax proposal will have no negative effects on it. In fact, it will be positive as the positive redistribution effects work their way to the ACT economy.
It would be interesting to see how WA will react to this taxing and redistributing idea. It had in the past tried to leave the Commonwealth.
Now given that everyone can expect the mining boom to last and its implications for WA, would it consider that parting issue again?
The most significant implication of this tax impost is its geographically differential impact. The states with large mining production will bear the brunt of this tax, while other states with little or no tax will be big winners.
As a result, it can be expected that the reactions across the nation are likely to be very different.
Compare West Australia with the ACT, for example. WA is the largest mining state in Australia, with abundant minerals deposits, such as iron ore, etc. It has been the engine room for the mining boom associated with the China boom. So the mining companies operating in WA will be hit by the proposed new super profit tax. The consequences are likely to be big the share prices of mining companies will fall due to reduced profits for their shareholders as compared to the case with no such taxes. New mining investments are also likely to not grow as much as otherwise. This will have an employment effect in terms of both numbers and wages.
On the other hand, the ACT does not have mining production. This tax proposal will have no negative effects on it. In fact, it will be positive as the positive redistribution effects work their way to the ACT economy.
It would be interesting to see how WA will react to this taxing and redistributing idea. It had in the past tried to leave the Commonwealth.
Now given that everyone can expect the mining boom to last and its implications for WA, would it consider that parting issue again?
2010-05-01
Times of mining super profit
Comments on Paul Cleary “Miners a special tax case”, 1/05/2010, http://www.theaustralian.com.au/news/opinion/miners-a-special-tax-case/story-e6frg6zo-1225860481471
While it appears the argument to grab more tax revenue from mining when it is very profitable seems very attractive especially when branding mining companies as multinational companies, its soundness is really questionable.
One can argue this at profitable times, what about when mining companies are not profitable or less profitable than other industries? Will the government be compensating their below profitability at those times?
One can be very passionate and emotional when looking at other's profits or high income. Everyone wants to have a share or a grab. Envy can inevitable become part of the equation.
That is how communist revolution came to reality in some countries. That still dominates some people’s thinking.
While it appears the argument to grab more tax revenue from mining when it is very profitable seems very attractive especially when branding mining companies as multinational companies, its soundness is really questionable.
One can argue this at profitable times, what about when mining companies are not profitable or less profitable than other industries? Will the government be compensating their below profitability at those times?
One can be very passionate and emotional when looking at other's profits or high income. Everyone wants to have a share or a grab. Envy can inevitable become part of the equation.
That is how communist revolution came to reality in some countries. That still dominates some people’s thinking.
2010-04-12
Abbott ponders a bad move in business tax
Comments on Dennis Shanahan “Abbott to woo small business with tax breaks”, http://www.theaustralian.com.au/business/small-business/abbott-to-woo-small-business/story-e6frg9hf-1225852508785
Abbott is moving to a dangerous territory here.
It will make the company tax more complex than necessary and will be inefficient.
He will benefit from waiting to see what is in the Henry Tax Review recommendations to see how tax reforms should be undertaken, as opposed to moving in the wrong direction.
Abbott is trying to match up with Rudd's populist approach, at the expense of integrity.
That is not good for Australia.
Abbott is moving to a dangerous territory here.
It will make the company tax more complex than necessary and will be inefficient.
He will benefit from waiting to see what is in the Henry Tax Review recommendations to see how tax reforms should be undertaken, as opposed to moving in the wrong direction.
Abbott is trying to match up with Rudd's populist approach, at the expense of integrity.
That is not good for Australia.
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