I have an oped on rent resource tax at the ABC.
The worst argument doing the rounds is that it doesn’t really matter if a rent resource tax adversely impacted the mining industry. Afterall that industry is contributing to a ‘two-speed economy’ and an over-valued currency. Bringing mining back to the pack would make macroeconomic policy making a whole lot easier. Not only is this argument economically defeatist; it is obscene. Taxing winners in order to provide essential government services is the very nature of modern taxation. Taxing winners in order to inhibit comparative advantage and undermine the imperative for ongoing economic reform is irresponsible.
We already have a resource rent tax that already adversely affects mining exploration and operations.
Semi Regular Libertarian
30 Apr 10 at 5:09 pm
Yes – that one is for offshore activities. The Henry Review is expected to bring it onshore.
Sinclair Davidson
30 Apr 10 at 5:20 pm
Sinc am I right in assuming that this new tax, like other taxes, will be deductible for income tax purposes. Does this mean that any money raised from the new tax will be somewhat offset by a fall in income tax revenue?
Does the new tax get paid from the grant of mining rights (ie before the mine is profitable)? In that case the only result will be the bringing forward of the miners’ tax liability and ver little extra revenue will be created.
Rococo Liberal
30 Apr 10 at 9:28 pm
RL – in the instance I understand yes. That has the effect of reducing the ability to pay fully-franked dividends. On the second point, I think yes again, but the tax doesn’t get paid until the accumulated earnings are greater than the accumulated costs (all grossed up by the long-term bond rate plus 5%).
Sinclair Davidson
1 May 10 at 9:29 am
Another indirect tax on supeannuation investments?
Id imagine a lot of super funds trading in shares will hold quite a few of the “blue chip” miners.
If you want more of something reward ir, if you want less punish it.
The government wants less mining.
Mole
1 May 10 at 9:53 am
Looks like it – the impact on superannuation and self-funded retirees is yet to be explained. But given the composition of the Henry Committee I’m sure they will have thought about it and will have detailed explanantions.
Sinclair Davidson
1 May 10 at 10:13 am
So the Government’s line that this will raise more revenue is a furphy, unles the rate of the new tax is higher than the income tax rate.
Rococo Liberal
1 May 10 at 12:13 pm
If it works the way I think it will work it’ll raise revenue to the extent that franking credits are not paid and are not cashed in by low tax rate taxpayers like retirees and superannuation funds.
At the moment it looks like a 40 percent rate, higher than the corporate rate, but the tax base is different to to corporate tax base, so the net effect isn’t clear.
Sinclair Davidson
1 May 10 at 12:35 pm
from what I can gather capital allocation to new projects will just stop dead in their tracks here as the funds are shifted overseas.
3rd world countries offer better deals and aren’t as politically risky.
JC
1 May 10 at 12:45 pm
“If it works the way I think it will work it’ll raise revenue to the extent that franking credits are not paid and are not cashed in by low tax rate taxpayers like retirees and superannuation funds.”
What about the anti=streaming rules?
If profits are lower, then tax will be lower, but dividends can still be fully franked
Rococo Liberal
1 May 10 at 9:09 pm
Assuming that the anti-streaming laws are a binding consraint and the marginal investor is a foreigner the rent resource tax shouldn’t impact the cost of capital.
Sinclair Davidson
1 May 10 at 11:12 pm
But on certain libertarian views it is only the *work* which should not be taxed. The natural resources themselves are not produced by anyone’s work. Therefore there is no reason not to tax them. Indeed, equal-share libertarianism would see all natural resources as inherited equally by all citizens. The tax on them is then simply a way of giving people what is rightfully theirs.
dan
13 May 10 at 9:34 am