RSPT worked out example and Who is next to cop such tax?
- Thread starter oracle
- Start date
Given that Labour is a "take from the rich and give to the not as fortunate" party.....
or more likely a "take from the percieved to be rich and give to the whingers who would rather a handout party ... "
Why stop with mining? Why not apply it to the banks (they're all evil don't you know 
), Wesfarmers and Woolworths (how dare they profit from selling us milk and tomatoes!), clothing stores (hey they buy it from China for $2 and sell it for $20, they don't have any other costs right? What a ripoff!), Jim's Mowing franchisees (surely they should be content with the equivalent of the minimum wage in earnings - anymore than that is just greedy right!?), Jewellery stores (I hear some of their mark-ups can be 300% or more - we're all getting screwed!!), car dealerships (why aren't they happy to just make a flat $500 per new car - that must be enough?)......
I could go on forever. Why should any of these businesses earn a good return on their investment risk and become wealthier than Sally down the road with 5 kids to 6 different blokes. Tax the lot of them to the hilt I say!
), Wesfarmers and Woolworths (how dare they profit from selling us milk and tomatoes!), clothing stores (hey they buy it from China for $2 and sell it for $20, they don't have any other costs right? What a ripoff!), Jim's Mowing franchisees (surely they should be content with the equivalent of the minimum wage in earnings - anymore than that is just greedy right!?), Jewellery stores (I hear some of their mark-ups can be 300% or more - we're all getting screwed!!), car dealerships (why aren't they happy to just make a flat $500 per new car - that must be enough?)......I could go on forever. Why should any of these businesses earn a good return on their investment risk and become wealthier than Sally down the road with 5 kids to 6 different blokes. Tax the lot of them to the hilt I say!
Why stop with mining? Why not apply it to the banks (they're all evil don't you know
I could go on forever. Why should any of these businesses earn a good return on their investment risk and become wealthier than Sally down the road with 5 kids to 6 different blokes. Tax the lot of them to the hilt I say!
but steveadl - that's communism, sorry i mean capitalism, err....no, socialism...no no - definitely capitalism.
isn't it?
Why stop with mining? Why not apply it to the banks (they're all evil don't you know
I could go on forever. Why should any of these businesses earn a good return on their investment risk and become wealthier than Sally down the road with 5 kids to 6 different blokes. Tax the lot of them to the hilt I say!
I agree. Pointless taxing the povo types- they have no money!
I could go on forever. Why should any of these businesses earn a good return on their investment risk and become wealthier than Sally down the road with 5 kids to 6 different blokes. Tax the lot of them to the hilt I say!
the problem is that with mining there is hardly any risk (especially if you buy an established mine), and the profits are huge. and the profits are achieved by digging something that belongs to all Australians out of the ground and selling it.
so the way to tax it is to have a normally taxed price level for a resource at which business can still grow, and if the market price of the resource goes above that level tax the difference at 99%
Hmmmm I may not know as much about the mining industry as you Strannik, but I disagree there is hardly any risk. As with any business you can buy something already established and pay a premium. But to get a new mine off the ground takes many years of exploration to find it in the first place, prove up the resource, secure funding, then years of construction before you see $1, and then after it's all operating you're at the mercy of so many external factors out of your control main one being obviously the commodity price, but others like labour force, environmental issues, weather, workplace problems etc. I'd hardly call that low risk.
You'd have lower risk opening up a retail store next week, assuming you run it right, at least you'll have cashflow coming in from day one.
There are/have been literally thousands of companies over decades who have poured billions of dollars into finding and getting resource projects off the ground. The vast majority have failed or are still trying. Then even if you go through all the above and manage to get a project going, things can still turn pear shaped eg. Ravensthorpe, the uranium (?) mine that was flooded in Canada 2yrs back and will be pretty much sitting idle for the next 5-10yrs (I forget name and details - was it Cigar Lake?) etc.
Now for all this - which I would call huge - business risk, much of which that is beyond your control, the Govt. is saying you shouldn't be entitled to anymore than 6% return before really big extra taxes kick in? Couldn't disagree more.
Yeah, I took Stranniks post as an attempt at humour. He was being sarcastic? Perhaps not? I'd think mining was the riskiest industry, or perhaps second riskiest after agriculture then?
See ya's.
Hardly any risk in mining...are you kidding!
You might want to speak to someone who has held shares in Pasminco, Andrew Forrest's Anaconda (he hasn't always succeeded) , Sons of Gwalia, Straits Resources (when mine hit an aquifer),
Delta gold etc.
If you look at fund performance (those that specialise in resources) over a 30 year period you might realise the risk with resource stocks is substantial and the average returns over time are not fantastic. Its a boom/bust industry with high inital capital requirements/developemnt costs.
You might want to speak to someone who has held shares in Pasminco, Andrew Forrest's Anaconda (he hasn't always succeeded) , Sons of Gwalia, Straits Resources (when mine hit an aquifer),
Delta gold etc.
If you look at fund performance (those that specialise in resources) over a 30 year period you might realise the risk with resource stocks is substantial and the average returns over time are not fantastic. Its a boom/bust industry with high inital capital requirements/developemnt costs.
I agree with TC.
One detail I had completely overlooked when this first came out is that all State royalties would be rebated by the Commonwealth, regardless of what they are. So State royalty risk would sit with the Commonwealth rather than the companies, which is a significant advantage for the miners.
It also means that if your project turns out to be marginal and you only make 6% profit, then you won't pay either State royalties or the RSPT - you will only pay company tax. This differs from the current system where you still get slugged with both royalties and company tax. So there is some support for marginal projects in the form of lower downside risk in not paying royalties which currently isn't there.
There are also the depreciation allowances and grants for exploration etc but I don't value them much. So it's not all bad. Although the 6% risk free rate is obviously still too low and the 57% effective rate above that still too high. I hope those are just ambit claims by the Commonwealth and sanity will prevail soon in getting some realistic numbers the miners can live with and get on with developing some projects.
One detail I had completely overlooked when this first came out is that all State royalties would be rebated by the Commonwealth, regardless of what they are. So State royalty risk would sit with the Commonwealth rather than the companies, which is a significant advantage for the miners.
It also means that if your project turns out to be marginal and you only make 6% profit, then you won't pay either State royalties or the RSPT - you will only pay company tax. This differs from the current system where you still get slugged with both royalties and company tax. So there is some support for marginal projects in the form of lower downside risk in not paying royalties which currently isn't there.
There are also the depreciation allowances and grants for exploration etc but I don't value them much. So it's not all bad. Although the 6% risk free rate is obviously still too low and the 57% effective rate above that still too high. I hope those are just ambit claims by the Commonwealth and sanity will prevail soon in getting some realistic numbers the miners can live with and get on with developing some projects.
It seems the "consultation" with the miners is strictly limited to some details of the implementation. The rest is carved in stone.
Kevin Rudd (on tv last night?) seemed to suggest there would be scope for negotiating on when a return is considered to be super (above 6% vs above 15% which applies under the current Petroleum Tax regime).
When the draft legislation is finally tabled I can see the definition of super rate of return being closer to 15% (than 6%) before the 40% super profits tax applies.
When the draft legislation is finally tabled I can see the definition of super rate of return being closer to 15% (than 6%) before the 40% super profits tax applies.
i'm not talking about stocks here, talking about actual business
sure mining has years of high demand and years of low demand. but once the mine is established - it will produce income for years and decades.
same with oil and gas. so while there is some risk, it's nowhere near the profit majority of companies get, and the returns are nowhere near the returns other businesses get.
mining doesn't produce anything, and it doesn't create value. all it does is digging stuff out of the ground and selling it, hence why it should be taxed through the roof, as stuff in the ground belongs to all australians
Gympie Gold had an underground fire. Never recovered. In fact "one pit miners" are discounted as risky.
I believe EVERYTHING you wrote is rubbish.
Totally agree Sunfish. I had assumed it was a joke but it appears it may not be...
This comes from the same school of thought that says manufacturing is somehow "special". Try manufacturing a car without mining iron ore.
Mining is a hugely competitive business internationally with massive risks, not the least of which lies in commodity prices and the actions of others. The capital at risk in each project is eye watering, alongside the list of failed projects attempted by the likes of BHP.
Manufacturing is just a margin business - you will forever be beaten by the next country with the cheapest labour. The resource industry is where it's at and it's what we should be doing and encouraging - the industry is one of our main competitive advantages and we owe our health system, education system and standard of living to it, among other things.
Hobbling new developments in this fashion is not good policy. The impost is just too high alongside the now significant sovereign risk of operating in Australia.
Who and what is next indeed? Anyone is now fair game it seems...
HE, be interested in your view on royalties going to the Feds rather than States, mechanics of how they are paid now - ad valorem, volume extracted, spot rate, fx?
Some have said RSPT will lead to significant cyclical volatility in mining tax revenue, which will introduce new risks to fed govts that struggle to balance budgets, or let operating expenditure blow out vs capital expenditure.
Personally, I think if Rudd thinks there's super profits in mining, then stop selling mining rights and put his hand up to make the govt a miner. It'd have to be a reasonable investment for compulsory super.
But then again, if govt can't operate steady cashflow businesses like utilities and tollways, what chance volatile mining operations?
And then again, how can you tax various projects at the same rate when some have had billions of tax payer dollars spent on infrastructure.....trains, ports, towns, etc. Eventually this tax is going to get a hell of a lot more complicated than anyone imagines, with provisos and subsidies left right and centre.
BTW, this is a comparison of the current and RSPT tax rates.
Some have said RSPT will lead to significant cyclical volatility in mining tax revenue, which will introduce new risks to fed govts that struggle to balance budgets, or let operating expenditure blow out vs capital expenditure.
Personally, I think if Rudd thinks there's super profits in mining, then stop selling mining rights and put his hand up to make the govt a miner. It'd have to be a reasonable investment for compulsory super.
But then again, if govt can't operate steady cashflow businesses like utilities and tollways, what chance volatile mining operations?
And then again, how can you tax various projects at the same rate when some have had billions of tax payer dollars spent on infrastructure.....trains, ports, towns, etc. Eventually this tax is going to get a hell of a lot more complicated than anyone imagines, with provisos and subsidies left right and centre.
BTW, this is a comparison of the current and RSPT tax rates.
Hi WW
Not sure what you mean - State royalties still go to the States. It's just that the Feds rebate the miners for the cost, so in effect the Feds are paying the State royalties, courtesy of the new RSPT funds gleaned from the miners. So nothing changes for the States, other than a significantly diminished outlook for new projects!
The States always wore price (and therefore fx) and volume risk through the royalty regimes (at least in WA - not so sure about the other States) but it's not geared like a tax on profit, being just based on revenue. Easier to calculate too.
You are absolutely right about the volatility of the income stream for the Feds though. For the Feds it could turn negative - they have to rebate the State royalties which are based on revenues and if the total profits aren't above 6% they won't have any money to do that with from the RSPT - it will have to come out of consolidated revenue - real popular in the middle of a GFC to be paying all the miners for their royalties! In that case the miners will do well - they won't have to pay State royalties or the RSPT, so it does help marginal projects keep ticking along. If the Feds raise that 6% number they run significantly greater risk down the track of turning negative from this.
This is absolutely a geared system - they do very well from it in the good years and it goes negative in the bad. It is based on the Norwegian model where the funds get chucked into a sovereign wealth fund for investment, similar to the Future Fund but for the whole country rather than just public servants. As a source of funds for annual revenue as now proposed it's terrible - the Budget forecasts are incredibly inaccurate already - this just adds another dimension to that. Something to blame in future? No idea what they're thinking...
well you are entitled to have an opinion too
