Why’s the business lobby letting the mining companies try to kill their tax cut?

This is what I don’t get about the RSPT and the accompanying 2% cut in the company tax rate proposed by the ALP: why aren’t the lobby groups for other businesses in Australia out there countering the mining companies’ shamelessly dishonest fear campaign? Apart from the mining companies, who might have to pay more tax – although only if the profits remain high; under the proposal they’ll pay less if they’re not, which will also help smaller mining operations to expand – all the rest of Australian business will be getting a tax cut, something they’re always demanding.

And yet they’re not out there championing it. Why not? Are they really that hostile to Labor that they’d rather see them defeated by the Liberals than take advantage of a significant tax cut they’ve always wanted?

How do these corrupt multinational mining companies convince all these people – workers and companies – to act against their own self-interest?

ELSEWHERE: The Political Sword wonders Is it that hard to sell the RSPT? and does some excellent myth-busting.

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36 responses to “Why’s the business lobby letting the mining companies try to kill their tax cut?

  1. confessions

    It’s something I’ve been wondering about too. The smaller mining companies should welcome the reforms because companies basically won’t pay any taxes until they start making a (super) profit, which clearly advantages the small players.

    Bernard Keane had a Crikey article this week where he said there’d been suggestions the small miners had been coerced into toeing the big company line. Dunno if it’s true, but if so, it would certainly explain why the debate is dominated by the multinationals.

  2. savvastzionis

    Perhaps the beneficiaries cannot think of a way of lobbying without sounding like they have been given a gift?

  3. the first rule of business tax cuts is: you do not talk about business tax cuts.

    the second rule of business tax cuts is: you DO NOT talk about business tax cuts

  4. Really? Even if that means you might lose them?

  5. Splatterbottom

    At some basic level all Australians understand that their prosperity is enhanced. They also understand that if you add an additional 40% tax this will have an effect on the industry, and on the prosperity of all Australians.

    They also understand that the 2% tax cut is a trivial sop which will not help most small businesses.

    They also understand that Kevin Rudd is a cancer on or democracy. He asked to be held accountable for his promise on political advertising and he will be.

    What surprised me about the swords comments was that they are almost all wrong.

  6. usesomesanity

    If Rudd does a backflip, redesign or abandons on the rate 40% or the amt. of super profits over 6% he will sign his fate out of office. The people are not buying the bullshit being whiped by the big miners to protect their own self interest. The only movements should be to future increase the earnings to all Australians, the people who own the assets. Australia have the highest grade iron ore in the world so their is no other market for the top quality iron ore and holding out for the highest price is a standard practice for minerals that can only be sold once. If BHP or RIO were really serious why arent they talking about moving their operations offshore, maybe they are making too much money selling other peoples/our property already, even with the new tax regime. They amazing thing is how these big mining companies are prepared to trash their own share price short term for long term greed.

  7. Splatterbottom

    Should be … enhanced by the mining industry.

  8. Saying it’s an “additional 40% tax” is about as wrong a statement about the MSPT as you can make.

  9. Splatterbottom

    Nawagadj, it is an additional tax, and it is at a 40% rate in respect of the profits it applies to. It will have a significant disincentive effect on mining decisions. It is a synthetic nationalisation of 40% of the mining industry.

    People will understand this, and the practical effects of it as they lose their jobs.

    There is also an additional $38 million of public funds Krudd has stolen from the Australian people to help his re-election bid. A cancer indeed.

  10. “It is a synthetic nationalisation of 40% of the mining industry.”

    What total garbage.

  11. usesomesanity

    “It will have a significant disincentive effect on mining decisions….the practical effects of it as they lose their jobs.”

    This is of course garbage, as mining super profits are redisributed to their rightfull owners the markets reprices the cashflows to mining companies and the market price the value of said companies. New investors see value in the same resources that have the same demand, there is no impact on supply or demand just more money goes to Australians. If less investment then supply deceases and price rises with minerals being sold at a higher price for Australians and more of their assets in the ground for sale at a later date.
    This is the only market for the highest grade iron ore. Mining companies may have a short impact trashing their own share prices and sacking workers for long term greed, however Austrailans at large are better wearing the short term jobs sackings by mining companies for long term gain. New investors will see value for the same high demanded resources and said sacked workers will be rehired.

    While there is demand for resources rest assured some company will get the capacity together to create the supply and make themselves some money.

  12. i doubt the company tax is under any threat, despite all the posturing.

    the superprofits charade has made sure of that

  13. Given time to reflect you might relaise that being an additional tax and being 40%, does not equate to it being “an additional 40% tax”.

    An error of basic logic.

    “synthetic nationalistion” – synthetic, as in, made up, not real? Well yes, then it is synthetic nationalism, just lke the health care reforms in the US are ‘synthetic socialism’.

    What is it with conservatives and their hysterical hyperbole?

  14. usesomesanity

    And how can jobs be lost that have not even created? Some projects may not go ahead regardless of tax regime.

    It is in the peoples interests for the the mining companies to make super profits or we dont get paid.

  15. Splatterbottom

    Jeremy, in an economic sense this is a synthetic nationalisation. The government takes 40% of the profits. There is an effective financing cost of the 10 year government bond rate built in to account for the fact that the government is not contributing to expenditure at the time it is made, but by way of later credit or refund.

    It is in fact a vendor financed nationalisation of 40% of every mining project.

  16. Splatterbottom

    Nawagadj, synthetic in the sense of being economically equivalent to a nationalisation, without actually being named as such.

    Make no mistake, this is a 40% tax. Step one is to calculate the amount of profit subject to the tax. Step two is to pay that amount to the government.

    Having taken its 40% the government then allows the amount they have taken as a deduction in working out ordinary income tax. This is logical, as the government has done a runner with that 40%.

  17. I see. So when the government takes income tax from me I’ve been “nationalised”.

    Seriously, the garbage from the apologists for big mining is amazing.

  18. usesomesanity

    Why is there a rush for mining assets from Vale, Chinalco and the like and no big miners looking to leave Australia.

    If you look at what big mining is doing rather that what they are saying the contrast is amazing.

    When the greens get the balance of power in the senate big mining may wish they got in while the going was good.

  19. confessions

    Business never wants to pay extra for anything. They and their media shills whinged when the low paid workers got a payrise, declaring the end of the world was nigh (yes Michael Stutchbury, I’m looking at you). They complained about the compulsory superannuation, saying it would be the end of the world as we know it. The mining companies are complaining about the govt putting a fair price on the minerals it owns.

    But business is always the first to go cap in hand to the taxpayers for a bailout when things go wrong. And, the other thing about the RSPT debate that I’m still waiting to get mentioned, is the $2b in govt subsidies the industry gets each year. I find it esp interesting that this figure is conveniently omitted in any talk of ‘nationalisation’.

  20. usesomesanity

    Marginal projects that maybe dropped have more to do with market forces over the last month that RSPT. A collape in demand makes these projects unsustainable and unprofitable therefore they will not make super profits anyway and would gain a rebate from the taxpayer so this is a net win for Australians and shareholders alike. Any worker who would have got a job would have been sacked when the project went bust.

  21. Splatterbottom

    Jeremy, the RSPT has different economics to a tax. This RSPT makes the government a full partner in the enterprise. I don’t see your objection to calling it for what it is. In many ways this is fairer than a straight tax because it reimburses losses.

    This sharing the losses aspect is also why it will prove very costly for the government as it pays out shitloads of money to failed mining ventures in a downturn. Ultimately it pays out money to failures, and extracts money from successful miners. It is a dog of tax, much loved by the barking mad among us.

  22. usesomesanity

    The Foreign investment review board is not seeing the investment drought big mining is.

  23. confessions

    Which failed mining ventures were paid out by the government in the last downturn SB?

  24. Splatterbottom

    None, confessions. The RSPT wasn’t in effect then. Once it is law, such payments will be required.

  25. usesomesanity

    Rudd needs to put into law one of his policies as explanded to the Australian people or he be mauled at the next election. No backdowns, changes, watering down or changes whatsoever will be tolerated. He his the prime minister of the govt. of the day and should back himself in.

  26. Splatterbottom

    He would probably benefit just as much from another big night out with the ladies at Scores.

  27. usesomesanity

    Well he does need to appear not to be soft.

  28. What is this mining industry misinformation I seem to hear so much about? It is pretty obvious they don’t like Dudd’s RSPT (which isn’t surprising), and their taxation rate figures are more comprehensive than the governments.

    In any event, mining companies’ capital is mobile, the real losers from this tax will be mining workers and communities that are dependent on mining. That’s because this amazingly complicated tax will increase government revenue at the expense of mining activity.

  29. Ok then Clive “SB” Palmer, lets not introduce the RSPT, and exempt mining companies from paying any taxes at all, zero nationalisation to speak in your language. Keep all the profits.

    But, since it is Australia’s minerals they are selling, they have to buy them of us, naturally, purchase expenses booked in as Cost of Goods Sold. The Australian government and the mining co’s have a Supplier – Customer relationship. You want to dig out our resources and sell them for profit? Sure, how much would you like to buy Mr. Palmer? Oh and by the way, our price per tonne has just gone up. Just like your power and insurance bills have, or say the rent one pays on one’s apartment or bank fees.

    Much better deal for Australians, and the mining industry would have nothing to complain about. Yippee.

  30. ‘What is this mining industry misinformation I seem to hear so much about? “

    Try the myths addressed in the link at the bottom of the post.

  31. baldrickjones

    I’ll leave this to Alan Kohler who tends to be apolitical unless confronted by stupidity:

    http://www.businessspectator.com.au/bs.nsf/Article/mining-tax-RSPT-government-Rudd-pd20100603-62SPZ?OpenDocument

    Says it all really – backed up by some facts and not just bland opinion that I am hearing a lot of.

  32. Marek Bage

    backed up by some facts and not just bland opinion

    I like Alan Kholer, but I wonder who’s barrow he’s pushing with this nonsense.

    An RSPT in its present form that only applied to future mines would potentially not raise a single dollar, because there wouldn’t be any future mines.

    Oh fuck off, Alan!
    No new mines in Australia? All because of Rudds RSPT?
    Hyperbole much?

    Of course royalties have fallen as a percentage of profits as mines have grown in scale and efficiency

    Fuck off twice!
    Why on earth would you not mention that contract prices for iron ore have shot up nearly 300% in the last five years?

    No, No, Alan. That couldn’t possibly have anything to do with the widening margin between what the miners pay for the minerals and for what they flog them for.

    Juanmoment put it brilliantly when he said we should charge miners a price per tonne based on current contract prices.
    I have a feeling they’d squeal like stuck pigs if they had to do that!

    Cheers

  33. confessions

    Juanmoment put it brilliantly when he said we should charge miners a price per tonne based on current contract prices.

    But isn’t this pretty much what happens now with royalties – they pay based on what they dig up. That’s why when the sector goes into a bust cycle it’s more economic for mines to shut down or stop digging and lay off staff. With a profits based tax they aren’t ‘penalised’ for continuing operations during an economic downturn.

  34. confessions

    None, confessions. The RSPT wasn’t in effect then. Once it is law, such payments will be required.

    If you think it doesn’t happen now, you are dreaming.

  35. Pingback: …who hadn’t said a word in favour of it while it was being attacked « An Onymous Lefty

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