Resources Super Profits Tax (RSPT)
Recently, we sent out a newsletter to our email subscribers about the Resources Super Profits Tax (RSPT). This newsletter drew one of the strongest responses to our newsletters to date. Mainy people wanted to express their opinions about this RSPT, so we thought the best way was to post this on The Mining Blog and allow people to post their comments below. Here is an exact copy of the newsletter article…
The proposed new mining super tax, named the Resources Super Profits Tax (RSPT), has sure been getting its fair share of the news lately.
Personally, I am a firm believer in the less-tax-less-government makes for a more prosperous future. I have had the privilege to travel to many other countries and see what works and what doesn’t.
There is no doubt about it in my mind – high taxing, bigger government scares companies away from investing. Less investment means less jobs.
There are a lot of arguments and counter-arguments going back and forth between the government to the mining industry. I thought that I would highlight the main arguments from both sides and let you decide.
Until next time,
Calvin
The Government’s Standpoint
- Current royalties and taxes fail to collect appropriate returns from private companies extracting non-renewable resources that belong to the Australian people
- The mining industry asked that any additional taxation needed to be applied to profits rather than the resource so they only paid extra tax when they were making money – this tax does just that
- The RSPT provides a more efficient mechanism for colelcting a share of the returns to the community
- The RSPT will encourage greater investment and employment in the resources sector.
The government has produced a Fact Sheet that fully outlines their rationale. You can get your copy here:
The Mining Industry Standpoint
- The mining industry is more than happy to pay its fair share of taxes
- The mining industry already pays its fair share of tax – $80 billion in the last decade
- Mining companies pay corporate taxes just like every other corporation, plus they pay royalties; these taxes and royalties already give an effective tax rate of over 40%
- The RSPT would raise the total effective rate to 58%, making it the highest tax rate in the world
- Our biggest competitors, Canada and Brazil have tax rates of 23% and 27-38% respectively
- Mining in Australia needs to be taxed at an internationally competitive rate
- Current mining operations should not be taxed retrospectively as these investments were made on the assumption of current tax rates.
Further details of the mining industry standpoint can be viewed at the Keeping Mining Strong website.
What is your opinion about the RSPT? Post your comments below…
Tags: Minerals Council, Resources Super Profits Tax, RSPT, Rudd Government
Only if all Australian could see on 1 heap the amount of spending that Kevin Rudd is doing. If you spend like a spoilt kid and you run out of money that Mum gave you what do you do next to keep spending?
You will try and make someone else pay for it and that is what he is doing. The more boat people he lets in, the higher is the the amount that we have to pay. We are the ones that will have to pay for his stupidity.
Leaving aside the direct impacts of the proposed tax (which will have an extremely detrimental effect on our economic future),I would like to address the aspect of Sovereign Risk. The fact that the Government and its Treasury staff are unable to see why their actions have damaged our sovereign risk status is in itself quite frightening. And just the fact that they are unable to understand the consequences of their actions actually damages our sovereign risk even further.
International lenders and investors look for certainty, reliability and consistency in an investment environment controlled by a mature government with sufficient intelligence and undertsanding of sound business principles to not make rash, ill-conceived or stupid decisions which will harm business and investment. Rudd’s government has been found wanting in all respects in the detail and in the manner in which this tax has been devised and announced.
Look, I sell product to the ports, power stations and mines. without projects and upgrades and continuous maintenance, we do not have a job.
I am amazed at this grab for money when I see the waste in the political system, ministers not quaified for the portfolio, cahnging of portfolio’s to often, are these people budgeted.
The current gonverment is the biggest waster of funds and money I have ever seen, to live like this in my home I would have to have one million dollars a week coming in.
Anyway, we have to wait for the next election and get them out.
Well where do you start that is the question? How bout this the flow down will effectively effect the entire country. Small business will be stung in thge following ways work will dry up, what doesnt projects do not,we will be scrutinized on our margins so that the big companies can recoup some of there proffits. How bout this for a thought how is it the GOVERNMENT addvetise certain industries like the BUILDING and TOURISAM industries how bout giant retail industries that make an excessive amount of margins how are they taxed?You see it all the time in pappers adds for instance YOU COULD DRIVE THIS CAR IF YOU WORKED IN THE BUILDING INDUSTRIES, this is an add campain our GOVERNMENT runs to entice people to join the building industries. I have one other burning point why why why do polititions get 30+ % super,cash it in once they leave politics, paid for life , recieve air tickets annualy, and who knows what else? Mining carried our AUSTRALIA in the hard times small business contibutes more than our fair share so fair go with very little returned in our favour, This Australian Government is short sighted lacks commitment to Australia people, fluffs everything they do with prommises that are never meant to go any further than there mouths,and has no idea in what they are doing. They gave so much money away last year(BOAT PEOPLE)(LOWER INCOME EARNERS)now they make promisess to small business to earn our votes, never got mine never will that they can only see how to return it in a hurry by picking the pockets of the hard working mining industry to get a return as quick as it will come if it is passed that is if projects start , keep going expand etc. FAIR GO WE ARE AUSTRALIANS YOU WORK FOR US AS A MINORITY GROUP NOW USE YOUR EARS AND LISTEN TO THE PUBLIC.So Ruddy you go do your TV and radio stunts to prove your human, how bout you concentrate on politics not addvertising yourself. Have you ever worked a day in the real world of the Australian people? I seriously dought it.
Will destroy O/S investment credibility by it’s retrospective application, kill off already planned projects and feasibility reports,decimate thousands of jobs existing and planned in mining, engineering and trades, take away indigenous employment opportunities, lessen the value of huge infrastructure projects underway to meet future demand by exporters, and create a corresponding backlash for non mining industry and service organisations across Australia. Super Funds will also be hard hit with losses at least equal to the Tax gain. Rudd justified this tax by saying that it was to spread the wealth (albeit without requiring a capital risk investment from it’s recipients), but then went on in Perth this week to offer most it back as infrastructure development funds to the States most affected. Roll on election! ( The writer has no money invested in the Mining industry, and wishes to be separated from the policies of greed and envy being espoused by this government).
The composition of the RSPT is another demostration of the lack of expertiese in out Government. These Theorist Terrorists need to get some real world experience. It appears they have a good idea, and assume it is practicval, because their acedemic experience tells them it is so. A sanity check would tell them:
Mineral Resources are “State” property, thus the royalty.
Employers create employment, not Government they are supposed to Govern for the good of the whole not the persecution of a few,
Government bond rate is about 50% of the real cost of money so their reasoning is flawed,
There is a proven multiplyer for jobs in mining industry – 7 to 1, which is how the miners can accurately predict how many jobs will be at risk with shelved or delayed projects, and finally,
If they had not squandered the savings assets built up by the previous government, they would not be rushing down this path to ruin.
Sorry – our Prime Minister [and a few of his associates] is on an ego trip, which blinds him / them to practicality or indeed reality.
We are not involved in the mining industry, but a lot of our work is related to spin off requirements.
HOLD IT!! both sides are telling lies and half truths.There is no point in speculation until the real facts come out.
Gerry Harvey got it right – Bunch of b#@&# amateurs. But unfortunately jobs are already being lost, projects put on hold or scrapped, and many thousands of people whose livelihood relies on the mining industry are living with unnecessary stress and uncertainty. But do Rudd and Co care? No, they only care about their chances of getting re-elected. And with every day which passes without this matter being put to rest, more damage is being done.
maybe mining can afford this super tax but it will be the working man who has to pay for more for the product in the future. its easy to see that the government hasn’t built anything lately-or maybe they have- and the price upset them- and its payback! how come banks aren’t hit by a super tax? they don’t produce anything-no machinery or maintenance or research and development that needs to be paid for. they’ve even cut back on as much of their workforce and infrastructure as they can. in comparison to mining and profits, do banks need to make a profit?
It makes sense for both the Australian government and the Australian miners to review the current tax & royalty system. However, doing so in a sustainable manner is a challenge.
For an economically sustainable tax solution it is important to retain the competitive positioning of the country’s mining sector. The current proposal by Rudd’s government lacks the nuances required to ensure the level of investments will not suffer from the taxes, thus weakening the industry in the long term.
In order to help both the mining industry and the Australian people the tax will have to factor in effects on ongoing projects (with high sunk costs), future developments and international JVs and M&A.
For a graphical overview of the proposals effects see http://thebusinessofmining.com/2010/05/13/miners-vent-fury-at-australias-tax/