Volume based royalty regime not that bad as some think they are

Comments on Stephen Bartholomeusz “The premier factors undermining the MRRT”, 12/02/2013, http://www.businessspectator.com.au/bs.nsf/Article/mrrt-mining-tax-royalties-oakeshott-greens-politic-pd20130212-4U3P3?OpenDocument

Stephen, I think you and many people are mistakenly incorrect on the merits of the current volume based state mining royalty regime and how it practically operates, as well as some of the shortcomings inherent with the profit based resource taxes.

The current state volume based royalty regime is actually not as rigid as you people think it is and it can be changed to suit the actual situation with particular mines, e.g. no royalty or reduced royalty paid in the first number of years of producing minerals and in the late stage where costs are higher.

More importantly, volume based royalty reflects the estimated value of owning the minerals, as opposed to the profit sharing situation under the profit based resources taxes.

To sharpening the point, if companies are so inefficient that they would not produce any profits even though efficient companies would produce, one would have a situation that the value of owning the minerals would be becoming 0.

Further, more efficient firms would be taxed more heavily than less efficient firms in terms of the same minerals, simply because the former generate more profits than the latter do.

Why should owners give away their value to inefficient firms and punish more efficient ones?

Is that fair to the owners or minerals or mining companies?

Further, minerals are generally not renewable products, so a volume based tax can capture that value of non-renewable minerals.

Henry and Treasury people were either naively mistaken or deliberately misleading on this issue on the relative merits of the two regimes.

Other people including many economists and business commentators have been simply too lazy to use their own brain and as a result fallen into the same trap.

So, let's all have a cold shower and have a realistic analysis of the two royalty regimes and not simply ignore the reality and be mistaken hypothesis as actual outcomes.

Be rational - we are not monopoly in minerals!

This is comments on Professor Christopher Findlay's article on Public opinion on Chinalco’s investment in Rio Tinto April 19th, 2009, on http://www.eastasiaforum.org/2009/04/19/public-opinion-on-chinalcos-investment-in-rio-tinto/ I put it here, since it looks at the issue from another angle, often seldom mentioned in the media or by politicians.

While it is perfectly normal to have a range of views, some even very influential at high levels, especially when the issues involved can stir up strong emotions and the real interests are ill defined or difficult to define, one needs to realise an important point that the world mineral market is reasonably competative and Australia does not have the monoply power over world natural minerals, even though it is a very important player.

The Chinese investors want to invest in Australia when they see value in such investments. Equally, they will want to invest in mining in other mineral rich countries when they see value in investing there. Further, if they are not allowed to invest in Australia when they have the fund to do so, they can and probably will move to other countries, although it may be a second best outcome to them.

As in all investments, investors move down the ladder of investment opportunities, starting from the highest return to the point either their funds are exhausted completely or the benefit from such investment equals the cost of their funding at the margin. So although they may be dispointed if their applications are disallowed, they will move on to find other opportunities outside Australia.

After the dust of high emotions finally settles, one has to live with the hard and sometimes maybe very uncomfertable reality, bearing the consequential benefit or cost.