Super Profits Mining Tax

[Noblesse]

Alright, well the Super Profits Mining Tax looks like it will be a key election issue, therefore I am interested in what your informed opinion about the tax is.

The first person to call it a 'great new big tax' or mentions 'working families' loses the game.

Here are some facts by an independent news website (gathered from a range of newspapers), please note they are slightly biased:

What is the mining tax?
The mining tax is best known as the resource super profits tax, or RSPT. It is designed to replace the confusing array of royalties that mining companies presently pay to the states. Any profit made by mining companies that is above 6% of their capital investment would be taxed at 40%, and all royalties presently paid to the states would be rebated.

Why are mining companies making “super profits”?
Senior economist, Dr John Perkins says that resource prices are increasing rapidly because there is not adequate global production capacity. This has led to a huge difference between the cost of getting minerals out of the ground and the price at which they are being sold. Contrary to popular belief, most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense. Remember that these minerals are a finite resource – when they run out the money stops coming in.

Why does the Government want to introduce the mining tax?
Presently, mining companies pay royalties to the states which vary depending on the mineral being mined. While the cost of minerals has skyrocketed on the world market, these royalty payments have not risen anywhere near as quickly. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today’s profits and that’s where the new mining tax comes in.

What will the new tax be spent on and why?
While parts of the Australian economy have benefited from the resource boom, other parts have suffered. Strong demand for our resources has pushed the Australian dollar higher, hurting farmers and manufacturers who export Australian-made products as their products have become more expensive to foreign buyers. The higher dollar has also impacted tourism and our foreign-student education industries. As a result, we have what has been described as a two-speed economy. The miners and associated service industries are doing very well, while our exporters are suffering. Labor plans to spend the new mining tax by cutting the company tax rate from 30 percent to 28 percent, and by introducing tax breaks for small business. This would help address the imbalance in our economy, and ensure that the benefits on the mining boom flow through to all Australians.

What would the mining tax mean for me?
Economic modelling by the Treasury as well as independent modelling by KPMG have found that the mining tax would see the average worker gain about $450 a year, due to the flow-on results of cuts in company tax and tax breaks for small businesses. The overall cost of food would drop by 0.9%, clothing and footwear by 1.3%, housing by 1.1%, transportation by 1.7% and communication by 1.4%. The inflation rate would drop by 1.1% which would, in turn, ease the pressure on interest rates and finally, Australia’s gross domestic product (GDP) would rise by 0.7%.

Myths:

The tax will hurt the Australian economy
Many analysts and business groups have come out in support of the mining tax. A group of twenty economists led by the former ACCC Chairman, Professor Alan Fels, have put to bed claims that this tax will hurt the Australian economy, saying that there is “no substance to claims that it could lead to a rise in the cost of living.” Furthermore, they say that “mining is different from other industries. It exploits our natural resources. The Australian public should share in that benefit..” and the present taxation system does not adequately capture the “excess profits” that are presently being made by the mining industry.
As addressed in Fact no. 5, economic modelling has found that the mining tax would result in about $450 more in the pocket of the average worker each year. The price of various products would drop, inflationary pressure on interest rates would be lower and Australia’s GDP would rise by 0.7%.

The tax will hurt the mining industry
Update:
Clive Palmer, the self-declared spokesman for the mining industry, has recently retracted his claims that he had scrapped mining projects due to the resource tax. He now says that he was exaggerating.
If one listens to the mining CEOs and the Liberal party then this tax will spell the end of mining in Australia. However, according to just about everyone else, the tax will not hurt the mining industry at all; it may even benefit it. A group of twenty economists led by former ACCC Chairman, Professor Alan Fels, have released a statement in support of the new tax. They argue that the current system of royalties actually deters production, as it means that the miners must pay the states whether they are turning a profit or not. Whereas, if we tax the profits which return above 6% on the initial investment, projects which would otherwise be too expensive become profitable.

The economist, Chris Murphy has put forward a similar point, saying that because the resource tax only taxed profits and “not the first dollar of production” it was a better deal for miners. He also pointed out that the mining industry had even originally supported the idea.
The Organisation of Economic Cooperation and Development (OECD) has also come out in support of the tax, asserting that “”what drives investors is not necessarily that they are going to pay higher or lower tax but the availability of raw materials… If you look at these things strategically rather than with your sights on the profit of next year or next quarter, of course [it will continue to be] a wise thing to take the plunge, to take the risk and invest in Australia.”

Finally, the association of superannuation funds, known as the Industry Super Network, has called on the big miners, including BHP Billiton, Rio
Tinto and Fortescue Metals to drop their fear campaigns. Chief Executive, David Whitely, has said that “I think in recent days it’s become increasingly difficult to separate the truth from myth. What we’re having on almost every morning now and every day are increasingly hyperbolic statements being made by the Minerals Council and the mining sector itself about the potential effects of the tax.” In regards to the impact of the tax on miners’ share prices, he said “Our assessment is that the announcement has had to date a negligible effect on the share prices of the resources sector.”

The mining industry saved Australia from recession
Over the course of 2009, 15 percent of people working in the mining industry lost their jobs. Treasury Secretary Ken Henry has said that “Had every industry in Australia behaved in the same way, our unemployment rate would have increased from 4.6 per cent to 19 per cent in six months.” Therefore, it is misleading to argue that the industry saved us from recession.

The big mining companies are majority Australian-owned
The true level of foreign ownership of our mining companies can be hard to quantify. Who better to look to than Rio Tinto’s own Global Head of Strategy, Doug Ritchie. In a keynote address to CEDA on the 7th of May 2009 he said “The major mining companies – BHPB, Rio Tinto, Anglo, Xstrata – are now majority foreign owned, and that ownership has allowed Australia access to the global capital it needs to develop its resources. The stock of foreign investment in Australia at 31 December 2007 totalled $1.6 trillion. And mining companies, most of which are foreign owned or controlled, produced 8 per cent of our national GDP in 2008.”. (This one seems more xenophobic than anything...)

http://www.mining-tax.com.au/

Alright, so I'll start us off. From what I have read I am strongly in favour of the tax. The tax has been created by some of the top economic thinkers in Australia. For all those first/second year commerce students running for their Intro Micro textbooks, I am pretty sure that the creators are aware of the effect of taxes and dead weight losses.

I find the mining tax advertisements disgraceful, although the governments use of language in their advertisement is quite manipulating. The actions of the mining bosses would be comical, if they weren't serious. They are using a 'Tony-Abbott' (sorry, bit of bias there) style of debate, where when they predict the end of mining it is heard around Australia, when probed and they retract, no one hears it.

In a nutshell, I haven't heard a scrap of evidence how the tax will destroy Australia from someone without a conflict of interest the size of Australia itself.

Can we please keep the debate informed, and well behaved.

[ninwa]

In a nutshell, I haven't heard a scrap of evidence how the tax will destroy Australia from someone without a conflict of interest the size of Australia itself.

Thank you. Finally someone speaking sense and not letting themselves get caught up by all the propaganda. Kudos to you, seriously. (To be fair though, the Industry Super Network has a conflict of interest as well -perhaps not the size of Australia, I would say approximately Western Australia maybe)

Speaking of propaganda, I loved reading this bit of news the other day:

XSTRATA has been accused of misleading Australians over the impact of the proposed super-profits tax after signing a contract for work on a project the company said had been shelved.

The mining giant has signed a $3.4 million mining services contract with another company to manage a copper tailings facility at its Ernest Henry copper mine in Queensland.

The contract was signed last week on the same day the Anglo-Swiss company said it was suspending operations at the mine because of the impact of the resource super-profits tax (RSPT).

I am also in favour of the tax. I don't know why nobody has mentioned that along with the introduction of the tax, the government will also cut the company tax rate to make it a little easier on the businesses. I also wonder how many people against this tax are also part of the group blasting the Rudd government for the massive Budget deficit, and how they would propose to restore that deficit, because the Opposition certainly doesn't have any plans for it, judging from Joe Hockey's absolutely pathetic Budget reply. I'm not a fan of Rudd, but the Opposition hasn't shown that it can do any better.

Not to mention the benefit to superannuation (though as someone whose job consists of writing about superannuation law I'm a little biased), as part of the profits from this tax will go towards government incentives to increase the superannuation savings of Australians. The same people who complain about having to pay the Age Pensions probably also complain about this tax, the compulsory superannuation contribution and god knows what else. And then will probably complain about not being able to support themselves come retirement time because they don't have enough super saved up. It seems some people want everything, but don't want to pay for it.

[Fyrefly]

THANK YOU!!!!!

I get so pissed off when I hear those stupid ads all the time.
EVERYTHING I've learned about economics (which, bear in mind, I've studied at a university level for a year) tells me this tax is a fking GOOD IDEA.

And always at the end of the ad... it's like all the government ads where it's like "supported by the Cth Government Canberra" except it's a damn MINING GROUP... of course they're gonna be against the tax. Makes me angry that they're using all these bullshit scare tactics and threats of job loss. This whole "job loss" thing won't happen... I'm pretty sure there's a shortage of miners... they're not stupid enough to go around firing the few workers they've got. I just get so worried that people will get sucked in, and stop a good thing from happening.

Australia is losing its natural resources - and yet the profits are going to overseas companies, and the majority of the resources mined are headed overseas.
So, who's a tax going to affect?
Overseas.

So it's like taxing without really taxing... for the major part, it's foreigners that will have to wear the tax, not Australians... and of course, no-one's forcing them to continue investing in the Australian mining industry, or to continue purchasing their natural resources from Australia... they will only continue to do so as long as it continues to remain profitable for them (which, trust me, it will... their profit margins atm are ridiculous... despite the GFC, Rio Tinto made US$5.3bil last year, while BHP Billiton topped that with US$6.3bil).

[slothpomba]

I support it.

I think it will hardly hurt the mining companies at all. The minerals, oil, gas ect they take out of the ground aren't renewable. Australia's wealth has largely ridden on the back of the mining industry ( i dont know much about this correct me if I'm wrong). What happens once we run out of minerals and we are able to dig up less and less. It will happen one day.

The Arabian states are smart, specifically UAE. They realise the oil will run out one day and they're making plans for that, i think we should do the same and some of this tax will hopefully go towards to building up Australia.

Just my two cents anyway.

(I might be a little bias, i lean to the left).

This election is lackluster, abbot is meh and doesn't seem to be totally on it and Kevin Rudd has had his fair share of stuff ups, i don't really like either of them but its pretty much a 2 party system. Lesser of two evils i guess?

[Eriny]

It's hard for the lay consumer of news to know, I think. Firstly, you have the government saying 'this is good' and the industry saying 'this is bad'. Who knows better? Well, most people would say the industry because they make all the investment decisions and everything, but then they forget that obviously the industry doesn't want to pay a giant tax and wants to incite fear in people! But then, the government wants you to vote for them! Nobody is trustworthy.

All in all, I think it'll help smaller investments because there is now an incentive to invest. It may affect the bigger companies, I don't know. All in all, it'll most likely balance the budget within 5 years which is the point. The bottom line is that Australia definitely needs money for more diverse industries because the mining boom isn't going to last forever. I don't know if this is the best way to build that or not.

Australia is losing its natural resources - and yet the profits are going to overseas companies, and the majority of the resources mined are headed overseas.
So, who's a tax going to affect?
Overseas.

So it's like taxing without really taxing... for the major part, it's foreigners that will have to wear the tax, not Australians... and of course, no-one's forcing them to continue investing in the Australian mining industry, or to continue purchasing their natural resources from Australia... they will only continue to do so as long as it continues to remain profitable for them (which, trust me, it will... their profit margins atm are ridiculous... despite the GFC, Rio Tinto made US$5.3bil last year, while BHP Billiton topped that with US$6.3bil).

I guess the problem is that we definitely need to encourage people to invest in Australian mining because money does go back to us. If they pay a tax and that tax is passed on to the consumers - i.e. international buyers - demand for Australian minerals will go down. Minerals are very competitively priced at the moment. That said, I don't think that in itself makes the tax a bad idea, especially given that there are a finite amount of minerals in the world.

[ninwa]

The International Monetary Fund supports the tax

[Mao]

I would like to challenge a few points. I do not have an economic background, so excuse the lack of authority, but I'm just going to go by logic and common sense.

I don't like this tax. I am against it, and against Kevin Rudd's stubborness about the rate. My primary reason is here: [Also, so readers don't jump the holistic bandwagon of "yay take money from the rich foreign industry" and get to see some the story from the other side]

It would be the highest tax rate in the world

The Australian mining industry expects to pay its fair share of tax - but how much is fair, and globally competitive?

The super tax would bump up the amount of tax Australia's minerals and resources sector pays from over 40% to 58%.

This means, on a headline basis, Australia will now pay the highest level of total taxes to the government than any other region in the world. (Citigroup Metals and Mining, Research Note, 2 May 2010.)

Compare this to a tax rate of 23% in Canada and a range of 27%-38% in Brazil, direct competitors to Australia's mining resources industry and two of the largest resource rich countries that compete with Australia for investment, customers and jobs, says BHP Billiton Chairman Jac Nasser. (1)

The problem, says independent commentator Stephen Bartholomeusz, is that that level of tax is "so out of kilter with all the comparable jurisdictions, other countries could raise their rates but still improve their competitiveness in the contest for capital." Business Spectator, 20 May 2010.

"Once tax rates go above 50 per cent, project viability is threatened. In their 2010 Ranking of Countries for Mining Investment: Where Not to Invest, 2010, analysts Behre Dolbear told investors that in their experience, once the total 'government take' from combined taxes reaches 50%, a mining project's economic viability in a period of normal commodity pricing is threatened".(2)

Also,

So how much tax does the resource industry really pay?

According to Citi, the mineral resources industry already pays 38 percent tax. The proposed ‘Super Tax’ will raise that to 58 percent – by far the highest tax rate on mineral resources in the world.

According to Citi, the total tax burden on the Australian mineral resources industry will be 45 percent higher than the US, the next highest-taxing country.

Over the last 10 years the Australian mineral resources industry has paid a total of $80 billion in state royalties and company taxes.

[This places US, the next highest taxed country, at 40% tax maximum. The new Australian tax (with RSPT) will be ~40% for small projects with small profits, and ~58% for large projects with large profits.]

Why are mining companies making “super profits”?
Senior economist, Dr John Perkins says that resource prices are increasing rapidly because there is not adequate global production capacity. This has led to a huge difference between the cost of getting minerals out of the ground and the price at which they are being sold. Contrary to popular belief, most of our mining companies are majority foreign-owned and are receiving a huge windfall at the Australian taxpayer’s expense. Remember that these minerals are a finite resource – when they run out the money stops coming in.

Firstly, I disagree with "receiving a huge windfall at the Australian taxpayer's expense". Assuming that the minerals are an asset of the Australian taxpayers. Currently, miners pay ~38%, higher or comparable to our two main competitors, Canada (23%) and Brazil (up to 38%). The price of resources internationally would be roughly the same, thus, mining companies are not making ridiculous amounts JUST in Australia, they are making ridiculous amounts all over the place. Why should Australians tax them more? Greed. [Not implying it is absolutely immoral, just saying that that the emotive lobbying here is complete junk.]

Why does the Government want to introduce the mining tax?
Presently, mining companies pay royalties to the states which vary depending on the mineral being mined. While the cost of minerals has skyrocketed on the world market, these royalty payments have not risen anywhere near as quickly. In 2001, mining companies paid approximately 40% of their profits as royalties to the state governments. Today they pay less than 20%. Clearly, there is a strong argument that the Australian people deserve to receive a greater share of today’s profits and that’s where the new mining tax comes in.

My source [from Citi group] quotes 38%, the income tax for industry is at 30%. I can please have the source for your number?

What will the new tax be spent on and why?
While parts of the Australian economy have benefited from the resource boom, other parts have suffered. Strong demand for our resources has pushed the Australian dollar higher, hurting farmers and manufacturers who export Australian-made products as their products have become more expensive to foreign buyers. The higher dollar has also impacted tourism and our foreign-student education industries. As a result, we have what has been described as a two-speed economy. The miners and associated service industries are doing very well, while our exporters are suffering. Labor plans to spend the new mining tax by cutting the company tax rate from 30 percent to 28 percent, and by introducing tax breaks for small business. This would help address the imbalance in our economy, and ensure that the benefits on the mining boom flow through to all Australians.

Again, bad motive. Firstly, exports are primarily mineral and fuel. [http://www.dfat.gov.au/publications/stats-pubs/cot_fy_2008_09.pdf, page 13] So that brings the thought, why should the resource industry be punished for a slight hindrance on our 'secondary' industries? Also, let me bring the fact that these 'secondary' industries have the advantage that Australia is one of the few clean countries left in the world with little industrial pollution. Foods and fresh produce are exported not because the average Joe in China needs some milk, it's because some rich fat guy in Taiwan want monster lobsters. I wouldn't say these industries are 'suffering', it's just a bit of jealousy that miners are making a fair bit of money. But again, why punish the mining industry? If your neighbour bought two plasma TVs, should you steal one [the smaller one, of course] because everyone should benefit?

What would the mining tax mean for me?
Economic modelling by the Treasury as well as independent modelling by KPMG have found that the mining tax would see the average worker gain about $450 a year, due to the flow-on results of cuts in company tax and tax breaks for small businesses. The overall cost of food would drop by 0.9%, clothing and footwear by 1.3%, housing by 1.1%, transportation by 1.7% and communication by 1.4%. The inflation rate would drop by 1.1% which would, in turn, ease the pressure on interest rates and finally, Australia’s gross domestic product (GDP) would rise by 0.7%.

Again, wishful thinking. Source please? Also, [not an economical analysis so please correct me], if we put $450 back into our average worker's pocket, this will increase spending, and thus shouldn't it increase inflation rate and interest rates?

The tax will hurt the Australian economy
Many analysts and business groups have come out in support of the mining tax. A group of twenty economists led by the former ACCC Chairman, Professor Alan Fels, have put to bed claims that this tax will hurt the Australian economy, saying that there is “no substance to claims that it could lead to a rise in the cost of living.” Furthermore, they say that “mining is different from other industries. It exploits our natural resources. The Australian public should share in that benefit..” and the present taxation system does not adequately capture the “excess profits” that are presently being made by the mining industry.

All true words, but we all know how contention can affect interpretation. None of these statement actually says 'the tax won't hurt the Australian economy', it simply says 'there's no proof that it definitely will'. Furthermore, on the point that the tax need to 'capture the "excess profits"', judging by the overseas tax figures, our major competitors don't seem to capture these either. It is good to say that 'Australian public should share in that benefit..', I would like more money too. But at what cost? 10% of projects going overseas? 20% of projects overseas? 30% of projects going overseas? More?

The mining industry saved Australia from recession
Over the course of 2009, 15 percent of people working in the mining industry lost their jobs. Treasury Secretary Ken Henry has said that “Had every industry in Australia behaved in the same way, our unemployment rate would have increased from 4.6 per cent to 19 per cent in six months.” Therefore, it is misleading to argue that the industry saved us from recession.

This is the first time I've heard that used unemployment figures been used as the sole comparison for economic wellbeing. Sure, people lost their jobs. Sure, employment figures didn't fall that quickly in other industries.. Oh wait, what about the finance sector?
What about the revenues these industries made? What about export figures?
Therefore, right back at you, it is misleading to argue that the industry didn't save us from recession purely based on job flux.


Now, final touches by myself, and hopefully these will address other points in the original post that was too long to quote.

Firstly, it is a very bad misunderstanding and assumption that just because the companies are majority foreign-owned, money is flowing out of Australia. Money in fact is flowing into Australia, on building, construction, the investments made by these foreign companies go into our pockets, and profits they make eventually return as future investments also going into our pockets. The way to get more money into our pockets is to get more projects and investments, not to hold a gun to their head and say 'give me a share or else'. The latter is good in the short term.

Secondly, it is a myth that this tax will only be imposed on 'super profits'. The new tax start being effective after 6% return. Is 6% 'super profit'?

Thirdly, this new tax effectively give our competitors a huge edge, especially Brazil where labour is much cheaper. So unless our quality of minerals is much higher than theirs, there'll be a significant drop in investments. It is true that a profitable project won't be turned down BECAUSE of the tax. These projects cost a fair bit of money to research and plan, usually in the millions, so you'll be fairly stupid to throw already committed projects down the drain. So Clive Palmer is not the world's hypocrite, he just exaggerated too much, and did so out of context. As for future projects, not so promising.

And lastly, for people who "haven't heard a scrap of evidence how the tax will destroy Australia", no, there's no solid proof that it will severely affect Australia. But there's no solid proof that it won't, as far as I can know, I haven't heard anything from any companies that said "I pledge I will still invest in Australia even when the tax comes in".

So, I will finish with this conclusion. I have provided reasoning [not solid proofs] that this tax may hurt the economy. The first post provided reasoning [not solid proofs] that the average Joe shouldn't blindly follow 'tax is bad', and the mining industry is using strongly biased fear tactics to fool people. What I have not seen is why it is a good idea, and worth the risk of an economic downturn. What I have seen is practically every persuasive technique I can remember in one page, and a counter scare-tactic aimed at scaring the already scared media-bombarded readers to jump on the other ship.

TL;DR, in one sentence: the first post has no substance, the tax is too high, will hurt future investments, I don't like it.

[TrueLight]

A gigantic boondoggle is born
Author: Pater Tenebrarum
http://www.acting-man.com/?p=2588

“It's not as if anything lasting is going to be done with these new taxes on the mining industry. They are not going to be invested in a future fund for future generations. They are not going to be set up and put aside and guaranteed. They are just going to go into general revenue. And these new taxes will be spent just as the existing taxes have been spent. And we will have very little to show for them at the end of it. “
Peter Costello

good point. grab the money from the private sector and funnel it into government spending...lets distort the freemarket even more with more wasteful and inefficient spending!

"...We can therefore safely predict that one day, the mining boom will be over again. At that point, if Australia's new mining tax is implemented,  a greatly weakened mining industry will have to deal with the bust. Lastly, it seems doubtful – in spite of all the careful 'modeling' the bureaucratic planners ostensibly rely on – that Australia's government (or any other government pursuing similar plans) will enjoy anything but a very short term boost to its financial fortunes.

As should be clear from the headlines of recent weeks, mining projects amounting to tens of billions of dollars in new investment have already been postponed or declared unworkable under the conditions of the new tax. The government may, for a while (as long as commodity prices are held aloft by inflation), experience an inflow of additional revenue, but this will dwindle over time as old mines reach the end of their lives and no new mines take their place.

This is the effect that due to remaining unseen has not entered into the government's calculations. Economics is not merely about the obvious effects on the surface – proper economic reasoning must consider the unseen and long range effects of economic decision-making as well.

Evidently,  Australia's tax grab ignores this elementary truth, to the detriment of all involved – including the many Australian citizens that are supposed to get their 'fair share'. In reality, they likely won't see a red cent when all is said and done, while their employment opportunities are bound to shrink immediately."

from my perspective this is pretty spot on

[Noblesse]

@Mao, all sources were provided from the link in the first post (see http://www.mining-tax.com.au/)

* Yes, investment does flow from the mining industry. The only evidence we have regarding a fall in investment are statements by Mining Bosses, and this information is obviously biased, see XStrata (http://www.crikey.com.au/2010/06/04/what-you-wont-learn-about-the-xstrata-closures-from-the-media/)

* The rate of super profits is currently being discussed, as it is one of the main points of contention. I personally do not have a view on the rate.
Here is another (rather emotive) article regarding the tax rate (note that the figures are from the Australian Financial Review).

In fact, John Kehoe in an article in the Australian Financial Review of June 10 "Ads strike rich seam of exaggeration" has done the figures.

A mining project with a rate of return of 6 per cent will pay less tax under the RSPT and proposed company tax rate than at present — 28 per cent compared to the current 45 per cent (including royalties).

It's not till the returns hit 12 per cent that more tax will be paid. As Kehoe explains it: "Projects with a return of less than about 12 per cent will pay less tax because state taxes will be refunded and the company tax rate cut."

According to the Productivity Commission the return to capital in the national accounts over the period 1971 to 2008 averaged 8.5 per cent. What about for mining? John Kehoe in the AFR again: "Mining industry sources estimate that the typical expected rate of return on a mine is between 15 per cent and 20 per cent."

A mining project earning 15 per cent return (almost double the average for business in Australia) will pay under the government's proposals 45.3 per cent tax. It currently pays 38.7 per cent. that's a difference of of 6.5 per cent.

So this whole economic Armageddon campaign from the barons is because they might on average have to pay an extra 6.5 per cent tax? Give me a break.

Kehoe says that mines returning 20 per cent will pay 48.2 per cent total tax (RSPT plus company tax) compared to their present 37.6 per cent (royalties plus company tax). The difference is 10.6 per cent. Hardly the end of the world.

http://www.brisbanetimes.com.au/opinion/politics/mining-tax-will-cost-jobs-and-other-lies-20100611-y1hf.html

* RE competitiveness, from the IMF "The argument on tax competitiveness too tends to ignore the fact that the new proposals incorporate large risk bearing by Government - to the extent of 40 per cent of losses and more in the case of exploration," he explained. Few other jurisdictions seeking petroleum and mining investment are able to offer that." http://www.abc.net.au/news/stories/2010/06/23/2934885.htm
It also ignores the fact, that Australia has relatively good infrastructure already in place, and that there are limited resources globally.

* Again from the IMF: "The tax proposal doesn't show adverse effects on Australia's economic prospects either," he added. Consensus forecasts offer evidence that the outlook for business investment has in fact strengthened for Australia in recent months." http://www.abc.net.au/news/stories/2010/06/23/2934885.htm

EDIT: It should be noted that I thoroughly approve of the negotiations between the mining industry and the government.

[costargh]

I am strongly against the tax.

How can people say that because the majority of the profits are going to overseas companies, that it justifies making our mining industry the highest taxed in the world? Ummm if we didnt have FDI we would be in a fucken shit hole and thousands of people would be out of work. It's a complete xenophobic and protectionist sort of attitude.

For anyone who says that this won't affect the ecnonomy, then you clearly have no idea about economics. We are operating in a global market. If the ROI on an investment in Australia is significantly reduced compared to a foreign investment, firms will put their money else where which will reduce the growth in the industry. I realise the absurdity of this statement as a well known Economic thinker but I have read contradicting views by Economists lately - even colleagues of Henry.

To have an effective tax rate of ~54% is just ludicrous anyway. And the word 'super profits' is a fucken ridiculous marketing tool invented by the government to put a negative spin on mining. It's actually a complete sham the way the government has gone about this. No consultation with the industry, then creating a perception that the mining industry is a villain that doesn't pay its fair share. What is 'fair share' anwyay? Why not just tax them  at 90% and say that thats fair? How do you quantify what is fair to tax a particular industry?

The worst thing about this is how people are being sucked into this. My brother came up to me last week and said " Yeh I support the mining tax because they're making 'super profits'"

Lol what the fuck is a super profit? Other than an invented term by the government to explain profits about the economic rent or bond rate or whatever it is - can't recall. Point is, its a fabricated lie created to mislead the public about the industry.

You can be as profound at Economics if you like, but if you don't understand the real life industry issues then you will never be able to create an effective policy.

[ninwa]

Mao and costargh, what are your opinions on the government's intention to reduce the company tax rate to 28%, and its effects when combined with the RSPT? Note it was announced along with the tax, so probably won't happen if the tax is rejected.

EDIT:
And how would you propose to fix Australia's budget deficit problem? Please don't say "ask the Liberals" because did you see Joe Hockey's budget reply? They don't have a clue either.

EDIT2:

EDIT: It should be noted that I thoroughly approve of the negotiations between the mining industry and the government.

Ditto - that's the main issue I had with the RSPT, that the government's decided to impose it without any consultation with the industry which it will affect the most. Idiotic move.

[Mao]

Thank you costargh, nice to have someone who agrees, especially nice to have someone in the field of economics who agrees. I totally agree with your assessment on the misuse of 'super profit'.

Mao and costargh, what are your opinions on the government's intention to reduce the company tax rate to 28%, and its effects when combined with the RSPT? Note it was announced along with the tax, so probably won't happen if the tax is rejected.

I haven't seen any figures on this, but if it is from 30% to 28%, it will be a fairly significant tax cut, but not significant enough for a trade-off for our biggest export industry. No deal.

How to plug the deficit? Firstly, WELL DONE LABOR.
Secondly, stop spending. Cancel some of the non-essential reforms, and start saving. It won't be overnight, but at least it won't be at the expense of a healthy industry.

[costargh]

ninwa - im in favour of it. but not at the expense of one particular industry.

And yes just because we're in deficit doesn't mean you go tax an industry that is essential to our economy. I'm not one to develop policy for government. Stop spending and actually make some efficiency improvements to cut costs.

[ninwa]

New agreement http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2010/055.htm&pageID=003&min=wms&Year=&DocType=

Lol, as said by some radio guy, "the resources industry came out with a big stick and the Government cowered at the sight of the big stick"

[Eriny]

I think people forgot that the government also agreed to bear some of the costs of failed investments too, so it was essentially almost risk-free investment, which is good for the industry.