Tag Archives: mining tax

Loss-Making Tax “A Complete And Utter Fiasco”

24 Nov

The gummint has passed its Minerals Resource Rent Tax (MRRT) through the Lower house.

But only after “negotiating” deals with the Greens and Independents that … incredibly … actually render this great big new tax a net loss-maker for the government bottomline.

More on that in a moment.

But first, we bring you the brilliance of Barnaby Joyce’s well-justified mockery:

SABRA LANE: This was supposed to be the so-called “sunshine parliament” but a deal done last night to secure the Green’s support in the Lower House to pass the mining tax has the Opposition claiming dirty deals and the Green’s leader Bob Brown sounding sorry.

BOB BROWN: I apologise to people in the media and in the public who want to know about this but that’s the nature of the arrangement we have with the Government. And it will be, the details will be forthcoming and the Government’s got good reasons for not wanting to reveal it.

SABRA LANE: The Greens are still reserving their rights in the Senate, prompting the leader of the Nationals in the Senate, Barnaby Joyce, to go on the attack this morning.

BARNABY JOYCE: Every time we see the Labor Party do a deal, this tune starts going through my head and goes something like this: Da da dada da da dada… because we’ve got – it’s Monty Python.

It’s Monty Python. It’s Monty Python, it’s The Life of Brian.

We’ve got Bob Brown, Bob Brown who is like leader of the Judean front. “What have the Romans done for us?” What has the mining industry done for us? What have the – oh aqueducts, kept us out of recession, supported our standard of living.

You know, “What have the Romans done for us?” We’ve got Terry Jones, you know, Terry Jones is obviously Tony Windsor. “It’s not the Messiah, it’s just a naughty boy.” You know, he’s out the front there.

They’re not the Messiah, they’re just naughty boys.

SPEAKER OF THE HOUSE: Senator Joyce. Senator Joyce, could I just remind you to refer to senators and members by their correct titles.

BARNABY JOYCE: Okay and of course, you know, we’ve got Mr Rob Oakeshott, the Member for Lyne, who reminds me of Eric Idle. He’s always looking on the bright side of life, no matter what’s happening.

Graham Chapman, well that’s obviously Andrew Wilkie. And Michael Palin is Mr Adam Bandt.

But see the problem is it’s just a fiasco. We have no idea who’s running the show. It’s a complete and utter fiasco. In fact as we speak I look at a quote from Senator Bob Brown: “We’re very disappointed when the Government reached an agreement with Andrew Wilkie.”

Well we can’t have someone usurping his position as being the nuttiest person in the palace. No, that’s all his position.

Barnaby is right.

It’s a complete and utter fiasco.

Here’s what Alan Kohler (ABCTV News Finance) had to say about the MRRT, in Business Spectator (reproduced in full, emphasis added … and h/t Twitter follower @John_Poelwyk):

Mourning Gillard’s mining disaster

Australia’s effort to levy extra taxes on mining companies has been an unmitigated debacle, capped by the passage early this morning of the Minerals Resource Rent Tax with a further last-minute compromise.

It is one of the great lose-lose outcomes. We can only hope the Senate knocks it back.

To get the vote of Andrew Wilkie, the Member for Denison, a seat about as far from mining as it’s possible to get, the government increased the profit threshold at which the tax kicks in, from $50 million to $75 million.

This is now a deficit tax – it will cost more in concessions to get it passed than it will raise in new revenue. That gap widened by about $100 million last night with the Wilkie amendment.

There are two big problems with the MRRT: state mining royalties can be offset against it and an increase in superannuation has been shackled to it.

A resources rent tax was proposed in the Henry Tax Review of 2009 as part of a package of measures designed to deal with the pressure the resources boom was putting on non-mining industries.

The idea was to replace ad valorem mineral royalties on mine production volumes with a rent tax on profits because governments weren’t sharing in the big increase in commodity prices that increased the terms of trade and therefore the currency.

There was, and is, a fundamental disconnect between the terms of trade boom that was killing manufacturing and tourism and the tax revenue governments were getting from it because royalties are levied on volume not price.

The Henry proposal involved a 40 per cent extra resources rent tax and a reduction in company tax to 25 per cent, plus a series of depreciation and capital allowance benefits for manufacturers and other small businesses.

The last time there was a sustained terms of trade boom in Australia, in the late 19th and early 20th centuries as a result of gold, wheat and wool exports, the policy response involved regulating wages through the Harvester Judgement and then imposing a tariff on imports to protect manufacturing. This so-called Australian Settlement had the effect of insulating manufacturing from the terms of trade and its effect on the currency but led to a gradual, disastrous decline in competitiveness.

It’s worth pointing out that the United States had the same terms of trade problem 100 years ago but chose not to protect manufacturing, with the result that it became the great manufacturing powerhouse, only eventually destroyed in the 21st century by China’s currency manipulation.

In the 1970s and 1980s Australia removed tariff protection and centralised wage fixing, so that the new terms of trade boom – ironically resulting from China’s defeat of America’s manufacturing supremacy – leaves Australian manufacturing entirely exposed to its effects.

Former Treasury Secretary Ken Henry had been banging on about the two-speed economy problem for years, and the Future Tax System review that he chaired contained his solution: a resources rent tax to be spent on reducing company tax. Without wage regulation and tariffs there is no other way to protect manufacturing from the effects of the mining boom.

But the Labor government has managed to completely mess it up.

First the Resources Super Profits Tax was plucked out of the Tax Review by Wayne Swan and Kevin Rudd and dumped on the miners by surprise. They revolted and won.

Then Julia Gillard negotiated a lower tax on iron ore and coal with BHP, Rio Tinto and Xstrata so that only the smaller companies with smaller advertising budgets would complain. As part of that, she was forced to allow existing mineral royalties to be deducted from the tax, which totally negated the idea of replacing ad valorem royalties from a tax on profits.

And then, to make the whole exercise completely pointless, she tied it to an increase in the superannuation guarantee levy from 9 per cent to 12 per cent.

That increases manufacturing costs instead of reducing them, and vastly increases the cost of the exercise to the federal budget.

According to Brian Toohey in this morning’s Financial Review, the cost to the budget of the extra superannuation tax deductions will be $4.2 billion in 2019-20. The total cost of the concessions connected to the MRRT will be $9.4 billion in that year – less than a third of which is paid for by the revenue to be collected from the MRRT.

In the 2012-13 financial year, in which the budget is supposed to return to surplus, the net cost of the MRRT package – revenue minus giveaways – is $1.7 billion.

It is, in short, a joke. Everybody loses. It was an idea designed to help Australia deal with the terms of trade boom that has been bastardised by politics into a complicated impost on mining that achieves nothing at all and in fact worsens the position of everyone involved.

Business as usual then, for the Green-Labor-Independent comedy show.

Comedy?

Why not.

This show really has gotten so bad that if you don’t laugh you’ll …. ?

Why I Hang Farther To The Left Than Bob Brown

18 Aug

Got your attention with that headline?

Good.

Because on the topic of Australia’s last remaining real source of wealth – “our” natural resources – and, on the directly related topic of who should own them, you may be shocked to learn that your humble blogger hangs waaaaaaaay way out there on the so-called “left”.

With the likes of Venezuelan President Hugo Chavez.

Russian Prime Minister and former President Vladimir Putin.

And the government of Norway – which consistently ranks as the happiest nation on earth, and, the most prosperous.

[You see, when you are not beholden to group-think, and the false Left vs Right paradigm, then you can author what the Fairfax media called a “tribute site”, dedicated to supporting the debt-and-deficit views of a so-called “extremist” “far right” politician, and yet, hold “far left” views on other specific issues.  Independent, issue-by-issue critical thinking is a wonderful thing.]

Explanation to follow.

First though, a little background via this media release from Senator Barnaby Joyce, 17 August 2011 (my emphasis added):

Some towns are more equal than others

The Queensland Labor party obviously believes that all towns are equal but some towns are more equal than others.

I note that Queensland Natural Resources Minister Rachael Nolan is already backtracking from the Labor party’s decision to only ban mining within 2 kilometres of towns with more than 1000 people.

Ms Nolan also attacked the Federal Coalition saying that:

This government does not believe that landholders are entitled to the resources beneath the ground. They have never been and to change that now would represent a massive windfall to the agricultural class, to the detriment of those who own the resources now – that is, all of us.*

Ms Nolan is wrong. It is concerning that a Minister does not seem to understand the basic aspects of her portfolio.

Farmers in Queensland owned the petroleum and gas resources under their property until 1915, when the Queensland Government took them off them to protect the resources for the crown during World War I. From my latest investigations I think World War I has finished but the resources were never handed back to farmers.

To quote from section 4 of the Petroleum Act 1915:

… it is hereby declared that petroleum on or below the surface of all land in Queensland, whether alienated in fee simple or not so alienated from the Crown, and if so alienated whensoever alienated, is and always has been the property of the Crown.

Resources have been taken in other states in even more recent times, with the last being the NSW Coal Acquisition Act in 1981.

If Ms Nolan does not believe me, perhaps she would believe former NSW Premier Neville Wran, who stated in his second reading speech on the Coal Acquisition Bill 1981:

The proposal is not without precedent. In 1938 a Tory government in the United Kingdom acquired all coal then in private ownership. In 1953 the Menzies Government resumed all minerals, then in private ownership, in the Northern Territory.

In 1971 South Australia followed suit and acquired privately owned minerals. All petroleum in New South Wales was vested in the Crown without compensation, by the Petroleum Act, 1955 …

* Ludlow, M., Dunckley, M and Kerr, P. 2011, ‘Mining ban expands’, Australian Financial Review, p. 5.

As a fine, upstanding, and outstanding representative of the interests of the rural community, Senator Joyce advocates strongly for the rights of farmers and rural landowners. Especially of late, in their critical challenges with mining interests seeking to explore for Coal Seam Gas (CSG) resources beneath their land, placing our food and water security at risk.

I strongly support the rational, objective, common sense basic position put forward by both Senator Joyce and the Greens – that agricultural land should be very carefully protected against any risks from the mining sector’s activities.

Indeed, I support going even further than either Barnaby or the Greens on this issue.

Why?

There are no “resources” more vital to human existence, than water #1, and food #2.

If proposed mining activities pose any plausible risk to water and/or food security, then protection of our water and ability to grow our own food must always take top priority.

To argue otherwise, you must either be an idiot. A troll. Suicidal. And/or genocidal. There are no other options.

Where I differ with (or perhaps hold a more nuanced position than) Senator Joyce – and most definitely differ with the Australian Greens – is over the question of how best to maximise the benefits for all Australians of our Great South Land’s natural resources.

Senator Joyce is quite rightly concerned with the rights of rural landowners.

The Greens appear to be concerned with the protection of agricultural land – as should we all.  But in truth, the Greens are far more interested in taxing the crap out of the mining companies, whilst paying hypocritical lip service to the quasi-religious notion of “stopping catastrophic climate change”.

I am interested in the national (human) interest.

So, I advocate for nationalisation of Australia’s mineral, petroleum, and natural gas resources.

In our world of facile, intellectually-lazy “labelling” of every one and every thing (in lieu of reasoned, nuanced thought), that viewpoint places me right out there on the “extreme left”. Yes, right alongside “evil” socialists like Hugo Chavez.

And the government and people of Norway – the happiest and most prosperous nation (per capita) on earth.

Why is Norway so happy and prosperous?

One very big contributing reason, is that the Norwegian government nationalised their North Sea oil reserves decades ago, and has retained tight control over this vital resource sector ever since, including via the 67% government-owned StatOil. Profits are returned to a now-massive sovereign wealth fund, on behalf of all the citizens of Norway.

(This is used to finance what many would label a “welfare state”; the generally-understood definition of which I do not broadly support – another nuance, for another time).

Beginning in 2007, Venezuelan President Hugo Chavez moved in the same direction. He began an ongoing nationalisation drive, stripping foreign-owned companies of control over vital national resources, especially Venezuela’s vast oil reserves, along with food and key industrial production.

(The fact that it was predominantly US multi-national petroleum companies who lost out as a result of Chavez’s actions goes a very long way towards explaining the true reason why he is painted as an “evil” “insane” “socialist” villain by Western politicians and lapdog mainstream media … and thus, why you probably believe Chavez is all bad, and all wrong. How dare he be more concerned with the national interest of Venezuelans, than with the profits of multi-nationals or the deceitful ideologies of “free trade” and “globalisation”!)

In Australia, we have a ridiculous, unintelligent, ill-considered, short-sighted, shallow, and polarised “debate” over national resources.

Many argue for a mining “super profits” tax, to help “spread the wealth” of our here-today-gone-forever-tomorrow mineral resources, via a sovereign wealth fund.

Others mount high-minded, impressive-sounding arguments against this.

Many argue for restrictions on foreign ownership of Australia’s resources, including prime agricultural land.

Others mount high-minded, impressive-sounding arguments against this.

Those who argue against restrictions on foreign ownership of vital Australian resources include the treasonous “independent” Reserve Bank:

The Reserve Bank has warned that the economy’s increasing reliance on mining exports has left it more vulnerable to global downturns but suggests foreign ownership of the sector could help reduce those risks.

A paper co-authored by RBA assistant governor Philip Lowe and presented at the bank’s annual conference highlighted the benefits of foreign investment in mining at a time of intense political scrutiny of the industry’s ownership and profits.

The Greens correctly point out the fact that it is foreign-owned interests who benefit most from our country’s “poor white trash of Asia”, quarry-to-the-world status:

In June, Greens leader Bob Brown used a National Press Club address to slam the size of mining payouts to offshore investors and demand higher taxes on the industry to ensure Australians received their fair share.

He released research showing that $50 billion in mining company dividends would end up in overseas hands over the next five years — far more than the government’s watered-down mining tax would collect for taxpayers over the same period.

“Most of Treasury’s planned super-profits tax is now due to end up in the deep, deep pockets of millionaires in Switzerland, London, Calcutta and Beijing, rather than in Australian schools, hospitals or railways,” Senator Brown said at the time.

The Greens’ solution?

A bigger mining tax.

This sort of small-minded, tax-and-spend idiocy typifies the problems with our country.

Our politicians huff and puff a lot of high-minded hot air. While doing sweet FA, or at best, tinkering around the edges of critical issues.

Because most do not really have the national interest at heart.

They mostly have only their own interest at heart.

It does not have to be this way, dear reader.

Look at the example of Norway.

Then look at Bob Brown’s comment I’ve bolded in the above quote.

And ask yourself a simple question –

“Why dick around with half-arsed ‘solutions’ like mere “bigger taxes” on foreign-owned interests who are profiting off our national resources? If you’re serious about our national interests, then why not go the full monty – just like Norway and so many others – and nationalise our vital national resources?!”

Let us be quite clear.

My views on the topic of foreign “investment” (ie, ownership) of vital Australian natural resources, is far more than just “far Left”.

It is not automatically an anti-capitalist, anti-“free market” (a myth which has never existed, by the way), anti-liberty, anti-democratic, or anti-freedom position.

Instead, it is a nuanced viewpoint.

I strongly support the rights of Aussie landowners to have their livelihoods protected against risks from mining exploration/extraction.

I strongly support the absolute, unequivocal primacy of protecting agricultural land and water resources, over and above the interests of mere mining profits (you can’t eat and drink coal or iron ore, or the profits from them either).

I strongly support just and proper compensation for landowners wherever their property and/or livelihood may be impacted by the activities of other industries.

I strongly support the right of all Australians and their descendants, to enjoy peace of mind thanks to assured, long term water and food security, above all other “economic” considerations.

And, I strongly support the right of Australian citizens and their descendants, to have their interests protected (by their elected government) against the redistribution of wealth from the soil of our land, into the already-bloated bank accounts of foreign interests.

At the end of the day, that is the very heart of the matter.

All the confusion, and rhetoric, and theory, and ideology, and spirit-sapping noise over the relative alleged pros and cons of mining/agriculture/taxes/”free”-markets/socialism/capitalism … is all just a great big load of intellectual onanist #JAFA crap, that only serves to achieve one thing, whether intended or accidental.

It keeps our nation divided into warring tribes, all squabbling over red herrings … while the Big Fish make off with our big fish under the cover of theoretical, ideological, and philosophical darkness.

Why piss about arguing over the merits/demerits of a mere “tax” on foreign-owned mining companies?

Why piss about arguing over how big or small such a “tax” should or should not be?

If you really believe your own rhetoric … that Australia’s natural resources are vital to our national interest … then why not back your conviction with action, put your balls on the block, and simply nationalise the lot?

Despite what you have been led to believe, this is not a far out, “extremist” idea at all.

See for yourself the long list of countries – many of them iconic so-called “capitalist”, “free-market” countries like the USA and the UK – who have all nationalised key resources, infrastructure, and/or industries, for their national interest.

Of course, to do so here in Australia would require a government of adults. Not the current crowd of self-serving, incompetent halfwits … on both sides of the House.

Which is why I also advocate that we change the electoral laws, to only allow real adults to run for public office.

And, it is why I advocate above all for fundamental monetary reform. A complete decentralisation of the power of “money” and “credit”. Thus rendering moot the inane, archaic, 19th century, debunked-by-reality “free market” “capitalist” arguments of the RBA and the banking sector et al that we “need” “foreign investment”. Because when the RBA, the banking industry, #JAFA economists, and/or politicians say that we “need” foreign “investment” “capital”, what they are really saying is this –

You ‘need’ to remain slaves … to foreign credit-suppliers”.

You see, dear reader, the reason why I advocate these “far out” solutions, is because I am Australian.

I believe national sovereignty stands in the way of transnational tyranny.

And I believe that to continue selling the farm, and/or what is under the farm, into the hands of foreign interests (whether ‘national’, ‘multi-national’, or ‘private’) under the guise of “foreign investment”, is both 100% unnecessary, and not in our national interest.

To quote another infamous political figure … “I make no apologies for that.”

UPDATE:

And in timely overnight news, the gold price jumps on revelations that the “evil” “leftist” Mr Chavez will nationalise Venezuela’s gold industry –

Gold settled at record highs today after Venezuela’s President Hugo Chavez said he planned to nationalise the country’s gold industry.

Venezuela President Hugo Chavez said today he plans to nationalise the country’s gold industry in a move to take over production and grow international reserves.

Speaking on state television via telephone, the leftist leader said he would be introducing a new decree to put exploration and extraction of gold into the government’s hands.

It will be “a decree to take the gold sector,” which still remains in the hands of a “mafia and smugglers,” Mr Chavez said.

“We don’t only have oil wealth, we have here one of the largest reserves of gold in the world … Let’s convert it into our international reserves because gold is increasing in its value.”

Mr Chavez also plans to move the country’s existing gold reserves out of European banks and into vaults owned by the country’s central bank. Venezuela’s official gold reserves, of 365.8 tonnes as of June, make it the 15th largest gold holder in the world according to the World Gold Council. The Latin American country is well behind the US, which leads the pack with 8113.5 tonnes, and second place, Germany, at 3401.0 tonnes.

Vast oil reserves.

A gold industry.

A President with brains and balls.

Lots and lots of pretty women.

Venezuela’s lookin’ better ‘n better all the time 😉

By the way, how does Australia compare with Venezuela for official gold reserves?

Badly.

Less than 80 tonnes, compared with Venezuela’s 365.8 tonnes.

Why?

Yes, all thanks to our stupid/treasonous Reserve Bank, who sold off most of our reserves early this century in a blunder to top all their (many) blunders:

Just over ten years ago, Australia’s central bank the RBA sold off most of the countries gold reserves under the belief that the price of gold would continue to remain flat, and that as an asset, it would no longer play any role in the future financial system, or any crises that may result.

A paper written by the central bank which recommended selling off the gold reserves conceded that that asset whilst the assets served as “insurance against a breakdown in the international financial system”, it was not necessary to hold.

The central bank’s justification for reducing its gold reserves so drastically was that gold represented a poor investment, and Australia had successfully integrated itself into global financial markets, and that it need not worry about access to those markets during a financial crisis.

Since the sale of the gold reserves the global financial systems has experienced severe stress on a number of different occasions, starting with the implosion of the technology bubble at the start of the millennium followed by the September 11th terrorist attacks, and more recently the global financial crisis in 2008.

The price of the precious metal over that time frame has risen spectacularly and the asset has begun to play an increasingly important role in the global financial system since the  financial crisis.

The central bank argued that continuing development of financial system meant that circumstances which would require Australia to call upon our gold holdings for economic reasons looked increasingly remote.

Idiots.

Or traitors.

In either case, the RBA should be disbanded.

End the RBA.

Follow the lead of Hugo Chavez.

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