We’ll be ROOONED!

You’ve really got to feel for the poor, oppressed foreign investment schemes like Xstrata. They’re always so close to ROOOOOIN!

Let’s just hope that the gullible Australians buying (and probably not realising they’re paying for) the mining companies’ shamelessly dishonest scare campaign don’t realise how often they’ve cried wolf before.

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36 responses to “We’ll be ROOONED!

  1. usesomesanity

    Memo to big mining: You can’t fool all the people all the time.

  2. Jeremy I take it that you are advocating retrospective taxation then, because that is one of the biggest problems with what Rudd is proposing.
    I seem to recall that you have previously got very upset about retrospective legislation.

  3. It’s not retrospective. It applies to super profits received after it’s implemented in 2011. Hardly “retrospective”.

  4. Splatterbottom

    Of course the RSPT is retrospective. One type of sovreign risk is where, after you invest big bucks to develop a resource, the government steps in with a large new tax, changing the rules in the middle of the game. This is very common in third-world leftist countries. Rudd is doing his best to ensure that Australia is perceived in such a light.

    Argentina has had to pass legislation banning tax changes for specified mining ventures in order to attract investment. Kevin ‘cancer on our democracy’ is ensuring that not only can people not trust him, they can’t trust Australia as an investment destination.

    We will probably have a mining tax at the end of this discussion, but it will be reasonable:

    1. It will not appply to projects begun before the legislation is introduced.
    2. It will not force the government to subsidise failed ventures.
    3. It will not pretend that the normal return on an equity investment in the resource sector is the long term government bond rate.

    Only a drooling ignoramus would consider those aspects of the RSPT to be reasonable.

  5. Just to remind people of what SB is proposing, it’s analogous to old businesses not having to pay tax according to the same rates as those starting more recently.

    It’s ridiculous. Hey, I became an Australian citizen BEFORE the most recent tax rates were introduced! I shouldn’t be subject to them – they’re retrospective! All existing businesses in the country should be immune from future regulation – because they started their businesses earlier, so it’s retrospective!

    According to a definition of “retrospective” that’s so broad as to be meaningless.

    If we accept Iain and SB’s argument, the government can never pass any law that affects existing businesses or people because they were here before it was. That’s IDIOTIC.

    Legislation should apply to all entities in the country – person or corporation, whenever they began. It should not apply to matters (profits, events) that occur before it’s legislated, definitely – but it should certainly apply to subsequent matters, including future profits and events. It’s absurd to suggest otherwise.

    “Retrospective indeed”. Only if you define it in the stupidest, most broad sense conceivable and define almost all legislation as “retrospective”.

    PS I agree that the legislation should not entail subsidising failed ventures, but I suspect you’ll find the mining industry doesn’t.

  6. Splatterbottom

    Jeremy, this is not about the the perceptions of those for whom there is no such thing as a bad tax.

    This is about how investors will view a country that suddenly decides to synthetically nationalise 40% of a particular sector of the economy.

    It is usual in tax law to grandfather arrangements entered into prior to to legislation being announced. The issue here is where large amounts of capital expenditure have been made and then a 40% tax is slapped on the profits after billions have been spent developing the resource.

  7. Ah, we’re abandoning the idiotic “retrospective” line now, are we?

    Pity that you’re still trying to run the equally moronic “nationalising 40% of a particular sector of the economy” line – which is, of course, total garbage. A 40% tax ONLY on profits above a certain level is not “nationalising 40%” of the sector.

    The money spent developing the resource will be well rewarded even with a 40% tax on the super profits. The government is still paying the mining companies extraordinary subsidies, and they’ll still get the full profits on the ordinary profits they expected when they commenced the mines. They just won’t get to flog all our resources off indefinitely at rates decided when they were much less profitable.

    Nationalisation! Just how gullible do you think we are?

  8. Splatterbottom

    This tax is retrospective. The PRRT was not. It only applied to new projects. The CGT was not. It only applied to assets acquired after the date it was announced. If you can’t see the reasons for the approach taken to these and many other taxes, then there is not much I can say to help you.

    This tax is a synthetic nationalisation, not because it is a 40% tax, but because of the other features of the proposal which produce an outcome economically equivalent to a nationalisation of 40% of resource projects.

    “they’ll still get the full profits on the ordinary profits they expected when they commenced the mines”

    Not sure what that means, but the way I see it mining investment is a lot like a lottery – you have a lot of fruitless expenditure, and a few of these investments pay off big. Now, the equation has changed.

  9. You have to be quite the idiot (or a gullible consumer of mining company PR) to think this is retropsective.

    I guess if the Govt changes income tax levels, I could claim it’s retrospective if it applies to my current income, and would only cease being ‘retrospective’ if I didn’t have to pay the new rate until after I had left my current employer and started a new job?

  10. confessions

    LOL! How serendipitous that SB is commenting furiously on a thread titled WE’LL BE ROOONED!!!

  11. I don’t know all the wonky details about the Australian tax system, but I’m pretty sure changes to income tax rates apply to all income, not just that of people getting new jobs after the tax rate changes. Does that mean they’d be retrospective tax changes? After all, immigrants would have chosen to come to Australia rather than some other nation based partly on our income tax rate, and it’s not fair to change tax rates after they’ve spent all that money on transport, housing, English lessons etc.

    Also, if SB is right about the mining industry (I have a bit more faith in geologists, but to be honest I’m also ignorant about that) then the elimination of marginal projects would probably be a good thing, as that means there would be fewer exploratory mine shafts being dug because there’s maybe a small chance there might be a little ore down there. Those don’t do any good except in a Keynesian “burying cash to stimulate the economy does some good” sense.

  12. I don’t think SB’s quite grasped the point we were making about what “retrospective” means.

  13. “You have to be quite the idiot (or a gullible consumer of mining company PR) to think this is retropsective.”

    Some people just like disagreeing for the sake of it. They’re called trolls.

  14. Clive “Call me SB” Palmer is pointing out that once a mining operation has commenced, no supplier is allowed to change their price for the lifetime of the mine.

    Like when the fuel prices go up, SB on the phone to Shell can be heard screaming: “We would never have started this mine if we had any idea the fuel price is gonna increase.”

    Once he finishes that call, with the Shell guy having told him he can go and get stuffed, SB makes the next call, this one to Telstra, telling them he’ll abandon any new mining explorations coz phone costs have gone up, something that wasn’t factored in when the initial profitability estimates where made. We can only imagine the giggle he gets from the Telstra rep.

    But hey, SB isn’t finished yet, just warming up more likely. There are the stationary suppliers, the catering firms, the insurances, fuck, every friggin supplier needs to be called, they’ve all increased their prices since the mine started. Can’t be, not in Clive SB Palmer’s universe, every variable must stay constant for as long as the operation exists. Otherwise he’ll go to Peru, where things are more predictable and stable.

    Last Thursday, listening to the local ABC station, they had this mining dude on, talking about his firm’s planned new mine near Tennant Creek. When asked what his calculations came to regarding the RSPT, he said he didn’t agree with it (surprise surprise) but that it would still be making profits, plenty of it, but it will make it that lil bit harder to find investors blah blah.

    Then, when asked about what he’d consider the biggest hurdle for the project to get of the ground he said the NT Gov, speak the tax payer, must upgrade Darwin’s port to allow for the resources to be shipped in the quantities they envision. In other words, the taxpayer has to provide the infrastructure, multiple millions of dollars, but when asked to pay their fair share for the resources they dig up its the end of the mining world as we know it. Freaks.

  15. Splatterbottom

    There was a logical reason that large one-off changes to the tax system, like the PRRT and the CGT, did not apply to investments made and assets acquired prior to the announcement of those taxes. In this respect the RSPT is retrospective in a way the PRRT and CGT were not. Even the meanest intellect should be able to comprehend that.

    The fact is that changes to the tax on gains from capital investments involves different considerations than say changes to taxes on income from personal exertion.

    Likewise, massive changes to the tax system are different in kind and quantum to the changes juan was so flippantly discussing.

  16. I don’t know what the PRRT is but the CGT could only be applied to items purchased after 1985 or whenever it was because the “capital gains” are calculated by reference to an earlier figure which people could not have known they’d need to record before the legislation was passed.

    The RSPT, that applies only to future profits – future EXTRAORDINARY, “super” profits – is more like any other tax or regulation applied to a particular class of business (except that it’s far too generous to the mining companies) and the fact that the business was set up before the tax was brought in doesn’t make it “retrospective”. It would be retrospective if it applied to income super profits they’d earned been lucky enough to fluke in previous years. It will not.

  17. Well of course the law is retrospective, so what?

    Are we to have dot points on our historical timeline that define different rules for different people.
    So let’s say you were born before 1977.
    Does that means that the Anti-Discrimination Act doesn’t prohibit or protect you from racial discrimination?

    The important point is that this RSPT is not retroactive , or ex post facto.

    These miners are the biggest fucking whingers in the country.
    They employ a measly 150 000 people and constitute less than 5% of our economy, yet they bang on about geese and golden eggs like they were the fucking Messiah with money bags.

    And as for Xstrata, they’re fucking pricks who don’t give a shit about jobs and communities as witnessed by how they have been trying, for the last two years, to fuck over my community, including my friends.

    Cheers

  18. PRRT – petroleum resource rent tax.

    Almost no noe has a problem with the concept of a RRT – in fact, almost everyone thinks it’s a good idea.

    It’s really the timing that has the big mining companies off-side. Being a profit based tax, the RRT tend to smooth out the bumps – less tax when times are tough and more when they are good.

    Currently the miner are in the middle of a purple patch, one they expect to continue, and they don’t want anyone upsetting the gravy train. The volume of the complaints is proportional to just how good things are ATM, and to what extent they expect the good times to continue.

    Of course, the conservative side of politics understand the economics of this perfectly well – no doubt they know some form of RRT is essential – but are happy to try and ride on the coat-tails of stroppy mining corps, which they hope will take them to an election victory.

  19. Math ain’t your strength SB, its either that or you are playing deliberately stupid, or maybe both.

    Revenue: 1’000’000’000
    Expenses: 700’000’000
    Profit b4 Tax: 300’000’000
    Tax 30%: 90’000’000
    Profit after Tax: 210’000’000

    Lets increase the tax from 30% to 40% and the company will pay an extra 30 million, bringing the tax paid to 120 million and the profit after tax to 180 million.

    Now lets assume a cost/expense inflation of 3% per year, compounded 10% over 3 years. 10% of 700 million equals 70 million.

    In $ terms, the above mining co had expenses escalating by 70 million over the last three years, while an increase in tax from 30 to 40% would amount to only 30 million.

    Can you follow SB, with revenues staying the same, quantitatively the cost inflation (wages, finance & operational expenses) far outweighs any increased taxation on profits after expenses when it comes to ROI.

    Operating expenses going up by 10% will have a much greater impact on profits after tax than the tax.

    Should you assume that the firm is able to increase its revenues, price per tonne, to reflect the increased operating costs and maintain current profits after tax, then the same logic should apply to a an increase in tax, up your selling price to reflect the higher tax rate and maintain the after tax profits.

    So, Splatterclive, unless you can demonstrate with some figures the hardship super profitable mining co’s would face should the RSPT in its current form will be introduced, compared to every other expense item going up by 3% per year, I will see your contributions on this topic as regurgitated Lib Party spin without substance.

  20. Splatterbottom

    Jeremy, it would have been very simple to have a deemed cost base for assets based on market value at the time of acquisition, or at the time the legislation came into effect. Deemed market value rules litter tax law. There are grandfathering provisions in many parts of the tax act, for example the superannuation provisions have lots of them reflecting the various changes to that law.

    Marek, unlike the other droogs here, at least you have the honesty to admit that the tax is retrospective. It is post the fact of existing investment expenditure. Also, as you would expect, miners will now take into account the changed risk/reward equation when considering further capital expenditure, and this will impact jobs and job creation. It is not their fault Australia will have fewer jobs available.

    Narwagadj, while many economic illiterates have never seen a tax they didn’t like, to say that support for a mining tax is universal is OTT. It is more correct to say that this tax can be made less vicious, and that tax reform in the mining sector is desirable. Certainly most people are not in favour of rampant government gouging of the mining sector to fund the socialist nightmare Labor wishes to inflict on Australia.

    Juan, your numbers are extremely sensitive to the self-serving assumptions you have made.

    Most expense is capital expenditure. The depreciation is known and stable. You are adding the tax on top of increases in variable expenses. Your assumption of a 10%pa increase in expenses is without foundation. In fact, the way the income tax works at the moment is fair – tax rises as profit increases. Your assumptions are so obviously flawed, I am not going to waste further time on them. They are as ephemeral as the soiled-panty fantasies that flit through your fenestrated frontal lobe.

  21. Garbage, SB – Marek called it “retrospective” as opposed to “retroactive”: you’re describing it as both.

    The point is that there’s a world of difference between applying a tax to income generated before it was implemented (which this one doesn’t) and applying a tax to future earnings of existing entities (which all taxes, including this one, d0).

    In the same way as criminal laws apply to people who are born before they were implemented, and criminal enterprises begun before they were implemented, but only to crimes COMMITTED afterwards.

    If you’re defining “retrospective” in a way that doesn’t cover ALL legislation, that’s to do with when the matter affected occurs, then the RSPT is NOT retrospective.

  22. Splatterbottom

    Jeremy, the PRRT was not retrospective, and for good reason. Interestingly the petroleum projects that were grandfathered under that tax will now, it seems be brought into the RSPT.

    This has nothing to do with criminal law, or indeed some other tax changes. It does have to do with vast amounts of capital being invested on a particular basis, and then changing the ground rules after the investment has been made.

  23. That’s the case for every business. Tax and regulation always applies to existing businesses.

  24. Apparently Clive Palmer will admit tonight on Four Corners that his previous fearmongering claims of prjects not going ahead etc were in fact exaggerations on his part.

    LOL at the grovelling peasants (and share holders) who automatically took the word of their greedy overlords!

  25. Splatterbottom

    “Tax and regulation always applies to existing businesses.”

    So why were the PRRT and CGT not retrospectively applied to prior investments and assets?

  26. Why did the government make exceptions in those cases? Gutlessness?

    Note: they applied to businesses that already existed.

  27. confessions

    RobJ: Bernard Keane exposes the lies and deceipt by Xstrata. Why isn’t this being reported in the MSM?

    http://www.crikey.com.au/2010/06/04/what-you-wont-learn-about-the-xstrata-closures-from-the-media/

  28. Splatterbottom

    Jeremy: “Note: they applied to businesses that already existed.”

    What is the point of saying this. All I am suggesting is the same rule as adopted for the PRRT.

    Confessions, I guess the reason is that the article is poorly written, and illogical. It does not have even the veneer of rationality, more a desperate attribution of other motives when it is quite obvious that the overall assessment of risk and reward will be tilted by this new tax.

  29. If the PRRT distinguishes between businesses based on when they commenced, then that’s profoundly unjust and it is the PRRT that should be reformed, not the proposed RSPT.

  30. Splatterbottom

    Don’t worry, the RSPT is designed to fix that. That is precisely why it makes sovereign risk a serious issue for potential investors.

  31. Shorter SB:

    Confessions, that article refers to many facts which I can’t readily repudiate, so let me just indulge in my usual abuse.

  32. Oh SB, the PRRT was actually truly retrospective (at least in part). The RSPT isn’t at all.

  33. Splatterbottom

    This comment from the article is clearly just making shit up:

    The real reason why it isn’t proceeding with its more expensive expansion of the mine at this point is simple: the copper price has tanked and doesn’t look likely to recover any time soon, not while there are concerns about sovereign debt and banks in Europe and the Chinese government is trying to rein in growth.

    It is a desperate clown trying to find any other reason than the obvious one.

  34. confessions

    Indeed nawagadj.

  35. baldrickjones

    Ha ha….it seems that no one here other than SB knows how projects are evaluated on their NPV at the time of selection – in that respect the tax is very much retrospective on the value of one project vs another at the time of the decision.

  36. confessions

    The RSPT is not retrospective, regardless of SB’s ignorant blather.

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