Resource rent tax statement

I’ve been busy for the last few days, working on a statement by a group of economists in support of the principle of a resource rent tax to replace existing royalties. The statement calls for informed debate about the proposal and takes no position on particular design issues, such as the choice between the existing system used for the Petroleum Resource Rent Tax (40 per cent on returns above about 11 per cent) and the government’s proposed Resource Super Profits Tax (40 per cent on returns above the bond rate, with a corresponding offset for returns below the bond rate).

My own view is that the RSPT design would be more efficient, but the losers under this design (those who can confidently expect high profits) have been very vocal, while the potential gainers (smaller miners undertaking riskier projects) have not given the government any support. Add to that the fact that the PRRT design is long-established (making scare campaigns a little bit harder) and simpler and there is a strong political case for a compromise along these lines. The most important thing is that the government cannot and should not back down on the basic principle of a resource rent tax.

Here’s the Press Release and Letter.

336 thoughts on “Resource rent tax statement

  1. Impressive expertise in the list of signatories. It would be nice to think that both the Government and the opposition would act / could act together responsibly on this, instead of politically, but the Coalition, as is usual on any appropriate economic policies, are engaged in conducting inappropriate scare campaigns.

  2. Typical of economists to back increasing the size of a Tax and Spend Government.

    Anyway, economists are wrong more times than they are right, so obviously this great big new super tax is wrong.

    Why Do We Have Economists?

    “economics is a dog’s breakfast of theoretical ideas and alleged causal relationships that are at all times unproven and in dispute.

    Read more: http://www.nationalpost.com/opinion/columnists/story.html?id=655fd957-7e38-4186-a7d6-3963c7c792b6#ixzz0ozZJUQPf

  3. At least you and Corcoran are consistent in your advocacy of ignorance, Tony. You should stick to reading the National Post, in case reality intrudes.

  4. As for the idea being pushed by the Coalition and Mining companies that the rent resource tax will “frighten away” miners and their investments to other countries – this would not appear to be the case at all.

    Today BHP and Xlstrata and 11 other major mining companies have offered 4.85 billion for the nations biggest coal railroad network

    “The group is committed to expanding the network to support growth and has arranged an acquisition loan of A$1.35 billion and A$2.05 billion for capital spending, Nick Greiner, Chairman of the Queensland Coal Industry Rail Group, said in an e-mailed statement.

    The 13 miners including Rio Tinto Group and Peabody Energy Corp. want to boost exports from Australia, the largest coal exporter, to feed demand for steel mills in Asia and higher prices. The bid is an alternative to Queensland State Premier Anna Bligh’s plan for an initial public offering this year of the non-passenger assets, which includes coal tracks and trains.”

    The title is ” BHP Group Offers A$4.85 Billion for Railroad Assets (Update1) ” – found on http://www.bloomberg.com (link unable to be posted).

    Hardly the sign of Mining companies “scared to invest” is it? They are putting their bid on the table for the railway because it reflects where their true intentions are – “ie want to boost exports”.

    The Coalitions (and the Mining firms) arguments against the tax are clearly completely false.

  5. @Tony G

    Typical of economists to back increasing the size of a Tax and Spend Government.

    Isn’t this tax roughly revenue neutral?

    Anyway, economists are wrong more times than they are right, so obviously this great big new super tax is wrong.

    At least they understand logic.

  6. Alice,
    I argue against this tax but I am also buying BHP shares. “Why?” you may ask.
    Rudd has a long history of folding when the pressure gets high. I also think that, if he does not back down, he may lose enough seats in Queensland, SA and WA to lose government.
    As I have said before, though, this tax does not seriously affect the existing mines. It will, though, greatly reduce exploration.
    BHP could well be making the same bet. It is also very difficult to know if the railway would have been worth more before the tax was announced.

  7. I was surprised to see no Professors of Economics from The University of Sydney and UNSW on the list. The former still provides a list of staff. I noticed that senior staff specialise in areas that are not obviously related to the topic. I assume this is the reason for not getting a contribution from that university.

    UNSW has changed a lot. There is now only a faculty of business. Incredible, if I may say. I could not find a staff list quickly.

    I found the following public discussion paper.

    http://knowledge.asb.unsw.edu.au/article.cfm;jsessionid=f03076bdaddfdd63b21068392a4f29497368?articleid=1139

    There surely is a need for your posted statement.

  8. @Andrew Reynolds
    Andrew…in reply to you (and knowing full well you have libertarian views) I note the following comment by Dan at Catallyx

    “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.”

    Including myself and my grandchildren Andy.
    The sad reality is also Andy, that taxes are being raised now and will need to be raised further, in many nations budgets and Australia will have to do likewise, as a result of the now global financial crisis. The Mining industry has enjoyed lower taxes than the majority of industries in Australia for some time now.

    Excuse the pun but its time they pulled their weight.

  9. Alice,
    As I have said time and again, I am not opposed to the principle of a Brown tax. If properly done it should have many of the benefits that are mooted for it. I even praised it (in principle) elsewhere on this blog.
    This one, though, is wrong for many reasons, including the level, the threshold rate and the retrospective effect.
    I have no problems with companies, or anyone else, paying their fair share of tax. Paying more than double the level that anyone else is paying, though, seems pretty damn extreme and must (IMHO) lead to reduced investment and effectively, little further development.
    .
    BTW – you are confusing left-libertarianism with right-libertarianism. Understandable for one that does not understand what libertarianism is, but you may want to actually study what they are first.

  10. Andrew Reynolds at 9: What is your source for $9 billion a year? At http://www.abc.net.au/news/stories/2010/05/25/2908894.htm in an article called “Factbox: the new mining tax”, the ABC says: “The Federal Government expects to make about $12 billion in the four years after the tax is introduced.” Now, I know the ABC can make mistakes, but in this instance I am more inclined to accept their figures than yours, which could be inflated because of your position on this issue.

  11. JohnL,
    There are a number of sources for the $9bn figure – the first one I googled was from Westpac, but perhaps the Budget papers may be more convincing. Look at the “Memo – Net impact of RSPT” line at the 10th line of the table.
    The $12bn figure comes from adding the $3bn expected in the first few months of operation in 2012-13 to the full year’s revenue in 2013-14. Obviously, the more relevant figure to evaluate the tax is the full year, not the partial.
    .
    Fran,
    Far be it from me to accuse you of trolling on the issue.

  12. i think the left and labor in general should acknowledge that the way this has been introduced is atrocious,
    i consider it to be one of the stupidest things labor has done,
    i think the idea that anything above 6% is a ‘super’ profit is offensive to all people,
    i think the timing could not have been worse with china stumbling, the euro creaking and the domestic housing market again looking dicey,
    people on the right and in big business are irrationally anti-labour, this has provided them with two decades of legitimate material to use against labour,
    rudd is a reckless moron and has done a great disservice to the genuine reality that big business gets off too lightly

  13. This statement supporting the resource rent tax is curious in its intent. It supports taxing profits rather than the existing production-based royalties as most economists would. But its other contentions that the mining industry will not contract conflict with this view.

    The claim that depletable resources are ‘different’ to other industries suggests there is a market failure associated with their production. Perhaps the implied notion is that they are costless to explore for, prove up produce and exploit – it’s hard to say for sure what they think because they don’t say. Hotelling in 1931 taught that in the absence of distortions competitive extractive industries drive a competitive equilibrium. It would be good to know what the distortion is here that warrants special treatment but for goodness sake don’t tell us it stems from the fact that the firms extract depletable resources. Is it that rights to explore are not auctioned? Be clear.

    From the correct claim that a profits tax is better than production based royalties our economists jump to the view that there is no reason to expect that the mining sector will contract when a profits-based tax “replaces” a royalty-based tax. The word replaces here is ambiguous since it suggests revenue neutrality but the current government proposal is anything but that. My understanding is that the current government tax is designed to yield huge revenues for government net. In no sense is it a “replacement”.

    In the final part of the statement the economists recognise that the resource tax will reduce “the profitability of mining companies and the value of the exploration and mining rights “ they hold. It is hard to tally this obvious recognition with their earlier claim that there “is no reason to expect a net contraction in mining over the longer term”. In fact you cannot reconcile these statements – they are simply inconsistent.

  14. @Andrew Reynolds

    Fran, Far be it from me to accuse you of trolling on the issue.

    Yes indeed. You’d never do that, which is just as well, because I wasn’t.

    Personally, were I devising the tax, the operation of the tax would predict significantly more than the $9billion.

    For a start, there would be no super profits threshhold and we wouldn’t even call it a super profits tax. It might be called the Progressive Resource Tax and it would apply from the first 0.1% of profit.

    That 0.1% might only be taxed at 10% but by the time the profits were up around 25%, the state’s share would be at least 50%. There would also be a windfall profits increment — descrtibing short term upward price anomalies from which the vendopr profited and which had little to do with the business plan of the miner — civil unrest in a source company, blockage of a shipping way etc … Profits from a price spike (defined as an upward movement in excess of 5% in any seven day period) would be taxed at 90% until the price returned to within 5% of the pre-price spike position.

  15. Fran,
    You may as well call that idea the “Vast Profits to Accountancy Firms Tax” and be done with it. The VPAFT would be incredibly difficult to administer and highly unpredictable in in its effects – except that the only real incentive would be to leave the stuff in the ground and mine it in Canada, Brazil or Africa.
    The net loss to Federal Government revenues would be (IMHO) huge.
    Would you make it a Brown tax so that if there was downside disruption (say a big strike) the government could fund up to 90% of the cost?

  16. Fran
    Sometimes,not always of course but more often than not actually [shame about the pro nuke stuff] you make very very good sense.

  17. hc suggests that the super normal profit tax is calculated on profits above 6%. I understand that the super normal profit rate of 40% cuts in for profits greater than the (Australian) bond rate. If the bond rate happens to move to 12% then this is the cut-off rate. Similarly, if the Australian (Commonwealth) bond rate falls to say 4% then this is the cut off mark. Please clarify.

    There may be a problem calculating a mining company’s profit rate. Assuming it is an accounting rate of return, defined on equity, then companies have some room to influence this rate of return via capital structure decisions and asset valuations.
    Please clarify.

    hc writes: “From the correct claim that a profits tax is better than production based royalties our economists jump to the view that there is no reason to expect that the mining sector will contract when a profits-based tax “replaces” a royalty-based tax. The word replaces here is ambiguous since it suggests revenue neutrality but the current government proposal is anything but that. ”

    I can’t see why the term ‘replace’ would suggest revenue neutrality. I understand it means the existing laws on royalty payments are replaced with new laws on super normal profit tax.

  18. The proposed tax isn’t neutral in its effects on the mining sector. But a large proportion of the proceeds goes to reducing the general rate of company tax and to better tax treatment of savings. So, the package as a whole is close to revenue neutral.

  19. @Andrew Reynolds

    Your comment that Fran’s proposal would be incredibly difficult to administer and benefit primarily the accountancy firms while making life for the Treasury very difficult, is a fair and constructive comment, IMHO.

    It seems to me one of the difficulties with the super normal profit tax is exactly its intent to be fair in the sense of not squashing the small, often local ,mining companies and not penalising large corporations during times when even the big end of the industry is facing slumps in commodity prices.

  20. PrQ,
    I answered JohnL’s question as asked.
    I would argue that a reduction of 2% in the general rate of company tax is unlikely to make any real difference to decision to invest in Australia or not. A difference of approx. 30% in mining is likely to make a difference to the mining industry.
    .
    I do not often agree with smiths, but in this case I think he is substantially right. I would extend his metaphor, though – this tax is robbing a large amount from peter to give a pittance to paul. It is bound to hurt peter a lot more than paul is advantaged. In the medium term peter is likely to simply give up and leave. This will result in the tax being substantially revenue negative – something I would normally be in favour of, but this is cutting off your nose to spite your face.

  21. John, I agree it is not neutral in terms of its impact on the mining sector. But the statement goes on to claim “There is no reason to expect a net contraction in mining in the longer term as a result of replacing royalties with the proposed resource rent tax”. This is coupled with the apparently contradictory claim “The RSPT will reduce the profitability of mining companies and the value of the exploration and mining rights allocated to them”.

    This inconsistency is not innocent since it involves dismissing all the criticism of the RSPT with a statement which seems on the face of it wrong.

  22. As I understand, the government is not saying that the bond rate marks the cut off point between normal profits and super profits. The government does acknowledge that there is risk in mining and that investors are entitled to expect returns above the bond rate. I don’t think they’ve said how much above, but let’s say it’s 15%, comprising a risk free rate (= bond rate) of 6% and a risk premium of 9%. .

    However, once allowance is made for the rebate of losses (which is not a normal feature of tax design) then taxing profits above the bond rate still gives a return to shareholders of 15%. In effect, by chopping both the top 40% and bottom 40% off the distribution of profits and losses, then the expected profit is unchanged compared to a system which does not take off the top 40% but does not rebate the bottom 40% either.

    “robbing peter to pay paul”

    This is the essence of revenue neutral tax reform. It’s exactly what the GST (“A New Tax System”) was all about. GST in, wholesale sales tax out, income tax down.

  23. @hc

    Harry, if all it’s doing is taxing rents, then it’s a transfer from the mining companies to the government that will have no effect on any production or investment decisions.

  24. Uncle Milton, That is incorrect if the tax reduces the return to exploring for and proving up mineral deposits. These activities are undertaken because a large reward is seen as possible. Most mineral prospects do not end up as commercial mines. Moreover John acknowledges this point by saying that the RSPT will reduce rthe value of exploration.

    Forget about taxing rents in the manner of Henry George. The theory was wrong when propounded since George failed to account for investments in land quality. The same is true with respect to slapping large taxes on mining profitws – they too will only be neutral for projects already in operation at their optimal long-run scale.

  25. the government significantly aids exploration now with SA’s PACE program being seen as the most advanced,
    vast sections of government are employed in sourcing the best info for miners to use at taxpayer expense with the returns assumed to be worth it,
    no-one in the mining industry seriously thinks that exploration would be damaged by this tax,
    maybe it would be fairer to drop the tax but simultaneously stop providing vast government resources and expertise effectively free of charge to the industry

  26. @Andrew Reynolds

    You may as well call that idea the “Vast Profits to Accountancy Firms Tax” and be done with it.

    What do you have against accountants? They are surely no less deserving than mining companies.

    More seriously though, this stuff could be done through a fairly simply piece of software and entry of the relevant data, in something close to real time. No accountancy firms needed.

    the only real incentive would be to leave the stuff in the ground and mine it in Canada, Brazil or Africa.

    I name you Clive Palmer and invite you to exercise your ticket to the Bahamas. Nobody in their right mind is going to pass up profits on this scale just because they can’t earn as much as if they could gang rape the country rather than paying a fair price for services rendered.

    Surely the real problem here is that if the Feds introduce a tax like this and the mining morlochs don’t leave for browner pastures, that other states like Brazil, South Africa and Canda may decide to use us as a precedent. Let’s face it, if Total can do a deal with Chavez, the three stooges, Albanese, Twiggy and Clive can cut one with Rudd.

  27. @hc

    Harry, I said the tax will have no effects if all it is doing is taxing rents. You said it won’t be taxing rents; it will be taxing the required return to exploration. There is no contradiction. And we need to bear in mind that the tax will be replacing royalties. So it comes down to whether replacing one distorting tax (royalties) with another tax, which might or might not be distorting, is net efficient for the resource sector. And then there is the net effect of the whole tax reform package, taking into account the cut in the company tax, etc.

  28. Uncle Milton, That argument is avoiding the point. A tax on rents will affect the demand for exploration since exploration is undertaken to secure rents. That is what is being denied in the statement by the economists when they say the tax will not “contract” the mining industry.

    Replacing one distorting tax with another does not inevitably lead to a better outcome. It won’t if the new distorting tax is large enough to choke off the development of new mining projects and that is what the debate is about.

    The statement by the economists is not proposing that an empirical study be undertaken to find out if the new tax regime causes less costs than the old one. They are asserting it does on the basis of theory that is, at best, unconvincing.

  29. @hc
    Nice try mincing the words, the letter actually says “… the proposed resource rent tax” not “a profits-based tax” as you say. There is no ambigous implications as you suggest.
    Surely with your obvious attention to detail you can see the difference between a resource industry and most other industries? One is sustainable and builds an asset while the other is unsustainable and simply takes an existing asset.

  30. @hc

    Harry, I agree it is an empirical question about the overall impact on the economy. But the rhetoric from the most vocal opponents of the RSPT is that it will obviously wreck the economy.

  31. Fran,
    I have nothing against accountants – if you knew my history you would know that. I do, however, know that tax accountants are a genuine expense to a business and complex tax laws just increase the expense. Given my knowledge of accounting I can tell you that many of the elements of the sort of tax you are talking about there would be heavily subject to accounting estimates and therefore complex to administer. Your faith in accounting software is mis-placed. They are great at doing what they are designed to do, but administration of this sort of highly complex tax with multiple and shifting rates is not one of them.
    On the question of companies moving – it is not a matter of “gang rap[ing]” anyone. It is a simple matter of return on investment. If the returns in Australia are being taxed at an effective (near) 60% and returns in (for example) Canada are taxed at an effective (approx.) 30% then the choice is very, very clear. The law simply requires the company directors to explore outside Australia, provided the prospectiveness of the territory is even close. It is not even a matter of choice. If Canada is silly enough to tax at 60% (unlikely given their comments on the RSPT), the exploration activity will move to Africa.
    Even thinking a little bit about directors’ duties should make that one simple to work out.

  32. I find this interesting:

    Norway’s petroleum tax system approximates a rent?based tax. Though based on its company income tax system, it utilises an uplift on expenditure to exempt the normal return and reimburses the tax value of exploration expenditure for companies in a loss position. Norway imposes a total tax rate on petroleum resource rents of 78 per cent, consisting of a 50 per cent rent?based tax rate and a company income tax of 28 per cent, with no deduction at the company tax level for the rent?based tax paid.

  33. fran, you are not allowed to mention the N word, or their massive sovereign wealth fund, or thier genuine attempts at an equitable society
    very un-australian of you

  34. @Andrew Reynolds

    if you knew my history you would know that.

    I knew that when I made the comment. Irony …

    If the returns in Australia are being taxed at an effective (near) 60% and returns in (for example) Canada are taxed at an effective (approx.) 30% then the choice is very, very clear.

    Well that is the claim but as we know, this is bogus. In effect, mining companies are paying between 13% and 17%. Yet even if they were paying more (and it’s hard to see how they could be given the position in 2001 when they were paying seven times as much proportionately and didn’t upsticks and leave) ceteris paribus applies. Where else can they get the same rate of after tax profit per unit of risk and hold it? What about the cost of starting again with new equipment? What about the interruption to supply? Shipping cost to market? Relative currency values?

    If you are talking about new start-ups the same basic considerations apply.

    Even thinking a little bit about directors’ duties should make that one simple to work out.

    Oh, I am aware they have a fiduciary duty to stamp their feet and carry on, especially if it succeeeds in discouraging rival mining start-ups. But we don’t have to treat them any more seriously than those soccer players who dive in front of goal to milk a penalty.

    I’d just love someone from the government to say: “you know, we’ve thought it over and we think we might need to revise the proposed tax: 60% and we will be starting with a low entry rate at 0%. That actually sounds fairer.”

    That would make my day. I’d be rushing to see the looks on the faces of the various corporate sleazebags and their Liberal playthings after that announcement.

  35. Andrew Reynolds at 15: The Budget papers do show what you said. It does seem as if the ABC fact sheet was wrong.

  36. Fran,
    Care to list the differences in the experience there? I can start. There is only one company extracting oil from Norway – the largely government owned StatOil, so the vast majority of the profits really goes to the government. StatOil can borrow at the government bond rate to fund its activities. The oil industry dwarfs all others in Norway, which has no other substantial natural resources. The oil is likely to run out there in the not too distant future. StatOil is controlled by the government

    Since the Norwegian State, acting through the Minister of Petroleum and Energy, has in excess of two-thirds of the shares in the company, it has sole power to amend our articles of association. In addition, as a majority shareholder, the Norwegian State has the power to control any decision at general meetings of our shareholders that requires a majority vote, including the election of the majority of the corporate assembly, which has the power to elect our board of directors and approve the dividend proposal by the board of directors.

    A few differences – I can find more if you like. This example is not relevant to Australia.

  37. It seems to me there is some lack of detailed information. Does anyone know the formulae for calculating the proposed tax?

  38. @Andrew Reynolds

    Fair enough Andrew. So what you’re saying is that the state should take over the exploitation of mineral resources?

    Maybe if we jack the taxes up enough, they will leave and then the state can simply resume them, licencing operators to work them for a government statutory authority. That sounds fair to me.

  39. Most familiar with neoclassical analysis of the issue would understand that the tax as originally proposed is essentially sound.

    The so-called tax is not really a tax but a method of getting at least some of the value for those resources which are owned by all Australians without impacting on the incentives to explore and extract. These resources are owned by all Australians as a result of federation and the vertical fiscal imbalance which is rectified through the Commonwealth Grants Commission which takes revenue raising capacity of states into account when doing its balancing. This balancing process effectively makes any resources nominally owned by a state owned by all. That and the little matter of all citizens in Australia being citizens of Australia not of any particular state.

    As JQ said at the outset, for any policy, however desirable in pure form, there are always imperfections when put into practice. These matters do provide plenty of scope for debate.

    Nonsense about the tax ruining the country and killing the industry are well outside the scope of intelligent debate. This type of nonsense is as sensible as belief in flat-earth theories, the moon landing hoax, creationism or the global climate change conspiracy hoax. Which, of course, means that between now and the election we will be hearing no end of nonsense. Not only because idiots are thick on the ground (and everywhere else) but because there is a lot of money to be gained by the mining lobby if the ordinary voter swallows such rubbish.

  40. Harry, are you claiming there are no rents to tax? If so, then presumably the mining industry could relocate anywhere in the world where taxes were suitably low (say, in Ireland[1]). Do you really believe that?

    fn1. At least until they jack the rate up to the EU average to pay for the bailout

  41. I will enjoy watching miners attempt to extract Australian resources from another ‘low tax’ country. Maybe we will have to put down underground steel barriers to stop them, similar to the ones between Egypt and Gaza.

    And if they believe the pickings will be better elsewhere, if there are other countries that are giving their resources away for free, I doubt there will be any room left at those troughs for a bunch of recently disgruntled Australian miners to elbow their way in.

  42. John,

    What I am saying is that the claims made in the letter are inconsistent and avoid the key issues in this discussion by making these inconsistent claims. The letter is endorsing the government’s tax while recognising that it will have negative impacts on the mineral sector (it will reduce the value of exploration investments) but nonetheless asserting that in the long-run it will not “contract” the industry. Of course the opposition to the RSPT is based on the point that it will have the disincentive effects that the letter acknowledges exist but which the letter denies will have bad effects on the industry.

    You cannot claim this without evidence. The current system distorts activity and so does the new proposal particularly as the tax is so large. All the letter is doing is guessing that this substitution improves things and asserting this guess as fact.

    What the introduction of the tax is saying that if a decent mining project makes it to the development phase (a rare event) and makes a lot of money the Government will take it away from you – it will expropriate a significant fraction of the gains. Of course this sovereign risk will damage exploration and development activity. Indeed even if the RSPT is eventually defeated some damage in terms of miner expectations has been done.

  43. Andrew Reynolds :Ernestine,I think EY’s paper is one of the simplest. Even so, it runs to several pages.

    The referenced paper answers my questions. Thank you.

    I don’t see a need to change my understanding of the proposed super profit resource tax. IMHO, EY’s conclusions as to the consequences are at most one of a large possible number of hypothesis.

    The super profit resource tax affects only the distribution of profits but not the profitability of a mining project. Furthermore, if JQ is right in saying that the proposed tax is close to (govt) revenue neutral, then it is the timing of the profits available for distribution that is most affected. Given the explanation of the policy, one can expect a modest net increase in tax revenue when averaged over a period of time that makes sense in terms of human planning horizons.

  44. hc,

    Is your income affected if 40% goes automatically to your family? If not then your argument in 3, p 2, about ‘the value of a mining project’ is simply wrong. A distinction is to be drawn between profitability and the distribution of profits.

  45. Tax ’em ’til their eyes bleed!! 🙂

    Alice: exactly!.

    BTW, does anyone remember the cavalier decision causing the wholesale destruction of a bunch of small businesses and nearly the town itself, by this Australian mining companyBHP – suddenly pulling out. Mining companies – meaning the board and highest level managers, don’t cry a river about workers or small business if it suits them to suddenly change their minds, then pack up and leave after everyone else has committed capital to their businesses, believing the mining company rhetoric of making a go of a mining project. IIRC, the Canadian company did eventually buy out BHP, and it had nothing to do with the current Resource tax proposal.

  46. The Central Flaw in the Henry Review, Para 4 :
    There is however, a fundamental flaw in the reasoning of the Review, which undermines its whole approach to the appropriate balance between the four tax bases defined above. That flaw is the assumption that the primary goal of economic policy should be to promote economic growth, as measured by GDP (along with other objectives such as equity and sustainability).

    I find John’s support of the principle of a resource rent tax to replace existing royalties, as being at odds with his comments about the Henry Review as being flawed.

    The RSPT is a more progressive, ‘economically efficient’ set-up. while royalties are more regressive. But do we want a more progressive system that gets the resources out of the ground faster, growth for GDP’s sake? Shouldn’t we be moving to higher ‘new resource’ prices, to improve the viability of recycle & to fund the move to renewable energy resources.

    I realise move forward on this is limited by the international willingness to move forward (See COP15). But I see the move from royalties to this RSPT system that favours ‘smaller miners undertaking riskier projects’ as being a step backward.

  47. @Gnoll110

    It is certainly not ‘logical’ to conclude that if some says that a primary goal of promoting economic growth, as measured by GDP, is flawed then a policy that just happens to increase economic growth as measured by GDP is a policy that the person therefore has to be against.

    That is as silly as saying that if someone says it is not a good idea to have a policy of eating anything if it is green (because some believe if it is green it will necessarily be nutritious and safe to eat) and then to suggest that because the person eats spinach this is ‘at odds with their comments’.

  48. @Freelander
    Well said Freelander…
    I would also like to say that my mildly Rudd hating partner (Doug Anthony’s party descendent – some things are excusable from country folks) in fact thinks this tax is a good idea and also thinks its time there was some redistribution from extremely profitable industries to other industries that make up the mix in this country.

    He will be ejected by the far lunatic right soon from his own traditional party and will be joining Malcolm Fraser.

    He said “I hope the Government actually makes a move on the banks next. I bet the banks are worried about this”

    It would be nice to think so. I only have one suggestion for Rudd – dont do a “back down Barnaby” on this and do do a “fool no-body watered down media concession for the Mining firms.”

  49. @Alice

    Maybe so, but it is not really redistribution, or at least it is stopping an inequitable redistribution of money from the extraction and sale of public resources. The ‘tax’ which is really just a charge, part charge for our resources, is simply stopping them from taking what is not theirs for free, that is, them redistributing the what the public owns into their own pockets. As it is they will get sixty per cent. If they were to engage in rational debate they would concentrate on the use of six per cent for where it cuts in, but given that it only takes 40 per cent the six per cent issue hardly matters. The miners are still getting a great deal.

    This retrospectivity argument is total nonsense as well. As far as I am aware there is no intention to charge them for super profits they have already made. By retrospectivity they mean that they have already counted all the money they thought they would get in future if the government continued to let them away with getting the resources for almost nothing.
    If the retrospectivity argument had any validity then government would never be able to impose a new tax on anything because the new tax would have implications for existing investments. Business is perfectly happy for any reduction in business taxes and does not offer to compensate the tax payer for the benefits a cut in taxes bestows on existing investments. So if they are silly enough to have expected that government would never start charging more for resources that the public owns, then more fool them.

    The nonsense about sovereign risk, states right and the variety of other furphies that have been floated by mining interests is staggering. Clearly they have no shame. That Abbott and his cronies have joined them is not surprising. We knew they have no shame.

  50. Bad luck, Alice. It looks like the government is getting ready to back down. Swan sent Tanner to front the 7.30 Report on the RSPT tonight. Sending a more junior minister seems to be the pattern once they are about to back flip – they have had a lot of practice.

  51. Andrew Reynolds, I don’t know why the government should back down if as one of the government’s key advisors on the resources super profits tax says Treasury and the mining sector’s analysis of their tax rates for mining companies are both correct for reasons ‘‘The Treasury analysis … says if you measure the income of the sector … according to economic concepts and look at the actual amount (of) tax paid and treat royalties not as a tax (but) as an input cost, then you end up with a relatively low tax rate,’’ and furthermore ‘‘The reason for that is that the mining industry is relatively capital intensive and is able to benefit from the depreciation.’’

  52. @Andrew Reynolds

    Hobo two, surely time for you to bed down in the park? Wednesday’s papers tend to have a few more pages so you might be a bit warmer tonight. Not as warm as when you can bed down with the weekenders though.

    But anyway, what ever made you think that Tanner is a ‘junior’ minister? You never know, the government could throw the mining dogs a bone, but I can’t really see them caving in which would be political suicide.

  53. @Michael of Summer Hill

    Quite right. The only correct way to treat the so-called tax is as an input cost. They ought to put the tax up on the sector as well to bring it into line with other industries. There is no reason to be subsidising mining with ‘tax expenditures’.

  54. @Freelander
    You say
    “The nonsense about sovereign risk, states right and the variety of other furphies that have been floated by mining interests is staggering. Clearly they have no shame. That Abbott and his cronies have joined them is not surprising. We knew they have no shame.”

    Not only do they have no shame. They obviously have very deep pockets that they can manage a media spin campaign. The minerals council has a website “urging” Aussies to help them fight “the attack on mining”. The TV ads will start soon and as well they have insisted their employees “phone” and otherwise badger the media and their local MPs.

    The miners not only have no shame. They have no ethics and no sense of moral responsibility to the country that has allowed them to make super profits.

  55. @Alice

    The current campaign reminds me of the media attacks on Whitlam in 75 – eg the Reader’s Digest ad on TV showing rats in the streets with abandoned cars and rubbish everywhere. Only readers Digest TV ad I ever saw.

  56. Maybe mining will hire some T-baggers and ship them into Australia as well, so we can have a full blown ‘grass roots movement’ in support of their tax revolt!

  57. @Freelander

    “The only correct way to treat the so-called tax is as an input cost”.

    Subject to the condition that the input cost is a function of the commercial (market) prices of physical assets, operating input prices (eg wages, fuel, repair costs), output prices of minerals, and depreciation allowances (as proxies for the second hand market prices of the physical assets), and the long term Aussie bond rate, I’d agree with you. It also corresponds to the content of the Ernst&Young (EY) circular referenced by Andrew Reynolds, although they use accounting terminology.

    According to EY, the calculation of the SPRT input cost is done before financing costs. Again this supports your terminology. It is a clear distinction to the calculation of income tax.

    Setting aside EY’s conclusions about the impact on the SPRT, I’d say they do raise a few questions which I can see are of practical importance for the mining company management, for their accountants and individual investors. While these matters need to be cleared up, they are not obviously different from questions arising from any taxation laws.

    Instead of ad campaigns, pro or anti, I would prefer to get some short ABC programs where the technical aspects are explained to the public at large at least on the level of the EY circular. It should become clear very quickly why there is a purpose for discussions between the government and the mining industry regarding the details of implementation as distinct from disucssions about the SPRT per se.

  58. Ernestine,
    It would have to be on SBS – perhaps dressed up as an Hungarian drama with some nudity in it. Technical tax matters are way too boring for the ABC as it is currently constituted.
    .
    That said, though, it looks like it may have to be a series. Swan is getting ready to announce “major changes”. Let’s see if they can get is closer to a good tax this time.
    .
    Freelander,
    You may not have noticed, but Tanner is junior to Swan. Perhaps not in intellect, but the Finance Minister is junior to the Treasurer.
    That aside, have you got your story straight on what a Brown tax is? It does look like you have learnt a little. Perhaps with some further reading you could work out that that the Australian taxpayer would have had to pay BHP $1bn or so when they closed Ravensthorpe.
    Maybe.

  59. Now, a reply from the “I’m with Stupid” team! Economists ridiculed over backing for tax. Includes quotes like:
    “I think economists are put here to make weather forecasters look good” – Ian Macfarlane.
    “Mining companies… are paying more than their fare share of tax” – Tony Abbott.
    “I make passionate love to mining company supermarket checkout chicks” (or something) – Barnaby Joyce.

  60. Andrew,

    Setting aside some details which matter primarily in a dynamic context, you have to admit that the SPRT input tax is very clever in so far as it is as ‘market oriented’ as one may get (ie the SPRT is a function of market variables other than managerial decisions about the capital structyure.) Surely,

    As for the article in the Australian which you referenced, I am not impressed. It is again a shadow boxing thing, which, as you know, I don’t like.

    On theoretical grounds, I do hope the Government adhers to using the 10 year Government bond rate as the “SPRT allowance” (using E&Y’s terminology). There is a coupon rate and a yield. The latter varies daily and the former depends on the issue. I understand that the numerical value of the ’10-year government bond rate’ is to be determined each year. I imagine they are going to take some weighted average of the yield. Again this variable is linked to market conditions, namely the financial market. It is neat. It fits into the conceptual framework of the CAPM and therefore is comprehensible for investors in financial securities.

    I am really glad JQ put this topic up because I might have missed the sheer pleasure of observing a clever policy measure in detail.

    Also, thanks again for the EY circular. It was helpful.

    PS: Not wise to pick on the Hungarians if you are in the banking sector(!), I’d say.

  61. hc :
    Forget about taxing rents in the manner of Henry George. The theory was wrong when propounded since George failed to account for investments in land quality. The same is true with respect to slapping large taxes on mining profits – they too will only be neutral for projects already in operation at their optimal long-run scale.

    Bollocks. Georgists will tell you ad nauseum that they only want to tax the unimproved land value and that taxing improvements is counterproductive.
    On your other points, I thought the proposed tax gave rebates for exploration expenses.

  62. Ernestine,
    Before addressing the substantial point, which article in “The Australian” did I reference? The only one I can see on this page is from the ABC.

    I have, several times, said that I have no fundamental objection to this tax. Ideally, it would be a close to revenue neutral replacement for royalties and I am sure the Feds could deal with the relevant transfers to the States – or perhaps the States themselves could implement it. I am confident that even if it were mildly revenue accretive the mining companies would be out there applauding as it is, theoretically, a better tax – even if you are paying some more.
    The issue I have always had with this tax is that the level is such that it will act as a substantial, and perhaps overwhelming, disincentive to invest in Australia.
    As a general statement, I would prefer to have much less tax than we do, but I try not to make the best the enemy of the good. This is a better tax structure than a royalty. At the levels indicated, though, it really sucks – particularly as it will just act not as a replacement for any old taxes (as the GST did), but simply as a brand new, big, impost.
    .
    gregh,
    I was trying, perhaps inappropriately, to indicate how boring this would be as television. Perhaps you missed the satire, both on the tax and on SBS. I may put [warning: satire] before my next one.

  63. Andrew,

    You are right, you did not reference an article by the Australian but a page from the ABC. My apologies for my error.

    The remainder of your post pertains to the impact of the changes of the rules of the game. I don’t have all relevant information to comment beside saying that, on theoretical grounds (minimum wealth constraint) there is an issue with the observed growing income inequalities (‘two or three speed economy’ type argument as well as intergenerational ‘our non-renewable resources’) and I understand that the new rules of the game work in the right direction. That is, the new rules of the game reduce the growing income (and wealth) inequalities within a market oriented framework. I can also say that the reduction in ‘international competitiveness’ (re tax) put forward by hc and possibly others, is not convincing. Otherwise, I do trust that the economists who signed the letter have done their homework and that the Treasury considers more relevant information than any single corporation or industry body.

  64. Andrew,
    Not just the size of mining industry profits but also the proportion of industry revenue that goes to profit has more than doubled over the last 10 years. If the government were to take 40% of those expanded profits they would still be above the return on revenue that they enjoyed prior to 2001. Since we had a thriving mining industry in 2001, the argument that the new tax is an overwhelming disincentive to investment seems shaky, as if profits at the old level were so disappointing, we wouldn’t have a mining industry.

  65. Harry, the question is not whether the RRT is an ideal lump-sum tax (we all agree no such thing exists), but whether it is an improvement on the existing royalties system. I assume that you agree that it is. The writers of the letter, supported by economic modelling, believe that it is enough of an improvement that it can deliver both more revenue and less distortion than the existing system. If you disagree, you need to show why, not just point to the fact of imperfect neutrality*.

    * Note that Ben Smith, who made the point about non-neutrality very effectively decades ago was happy to sign the letter.

  66. James,
    You seem to imagine a world where the mining companies have a choice – either to mine in Australia or not to mine at all. Under those circumstances I would agree that, provided we left them anything at all, they would continue to mine – if perhaps in limited amounts and only cherry-picking the best high grade deposits.
    Fortunately or unfortunately we do not live in that world. If mining companies face an EMTR of around 60% here they are likely to shift their exploration activities to a country that does not tax them that heavily and also has good mining potential. There are several of them, including Canada, the US, Brazil, the Phillipines and much of Africa. The governments of any of them would be happy to have the additional capital spent in finding and developing their resources.
    As I have said before, while the existing mines would continue to operate, the investment in them and in finding and developing their replacements would simply stop.
    The outcome of this is (IMHO) very simple to work out. We would end up with exhausted mines, no or very limited production and no, or very small, tax revenue.
    To address your specific point – in 2001 (and at many times before) the mining companies faced low commodity prices, so it did not matter where they mined they received the (largely) same revenue wherever they mined. They did reduce their investment in exploration as a result, but it was widespread.
    A tax at this level, though, provides a strong disincentive to invest in Australia and in Australia only. The logical outcome (indeed the legal requirement) would be to shift investment elsewhere.
    Again, as I have said before, it is not even a choice for a mining company. If the Board of Directors believes that the best returns for the company will be to shift investment out of Australia then they must shift. They have no real choice but to do it. The Corporations law requires them to do it.
    That is the crazy thing here – the government seems to be ignoring their own law.

  67. A couple of questions for John (et al) on the detail of the design, in particular, the risk free rate your letter supports. I am taking the side of the miners in these questions, in part to see whether you accept there is some truth in the miner’s rhetoric on the long term bond rate being insufficient and that bankers putting a hold on lending to poor old Twiggy:

    First, you say “uplifting undeducted capital and losses by anything above ‘a risk free rate’ would create potential distortions.” You did not say the government bond rate (as the govt has), but you say a risk free rate. Is it unlikely that these RSPT credits will have the same charateristics as a government bond even if they are ‘risk free’ (eg, not traded in a deep, liquid market). If not, I assume you mean the risk free rate for an asset with the same characteristics as an RSPT credit (ie, potentially tied up in an investment until it fails/succeeds or traded on some secondary, not always liquid, market). Therefore, a premium on the government bond rate to reflect the difference in characteristics (eg, liquidity, but others) would be appropriate. Agree? Problem is, we don’t know the characteristics of the market in which these credits will be traded, Ken Henry says ‘trust me’ it will be jsut like bonds. Should bankers putting up billions of dollars trust this?

    Second, is it true that RSPT credits/allowances could ever really be considered ‘risk free’, ie, as risk free as AAA rated Government bonds? Is the probability that the Government of Australia will default on its borrowings the same as the probability a future Government not honouring RSPT credits. Would you regard RSPT credits as having the same assuredness as AAA rated Government bonds (and I am talking the real world here where people are really having to raise billions of dollars)? I know a Govt admiting to a soveriegn risk is almost impossible, by defintion, but Govt’s change, there is real risk there isn’t there (god only knows what Abbott would do). Should the Govt quietly add some basis poitns to compensate for this risk (probabilities are not hard to work out but they don’t need to make it public)?

  68. Andrew,
    I think it rather more likely that, as Ross Gittens argues, offshore investment sites are likely to raise their taxes as well to capture the rents from this alleged flow of investment. India and Brazil are already talking about doing so. Particularly given that many countries are facing an (ideological) fiscal crisis.
    “I would agree that, provided we left them anything at all, they would continue to mine – if perhaps in limited amounts and only cherry-picking the best high grade deposits.” – again this does not describe the actual state of mining in 2001 or other periods of lower prices and is therefore unrealistic.
    It’s my understanding that the cost of exploration is rebatable under the proposed tax regime, as are the various start-up costs, and indeed any losses the mine makes until it is up and running at a profitable rate are subsidised; so why should this tax discourage exploration?
    But let’s hypothesise that those miners or the banks which loan to them which are free to move capital internationally (so excluding the smaller players) abandon their suspected reserves in Australia (most of which are mapped to at least some extent already) and move offshore. What would be the result? First, the price of prospects and exploration leases in Australia would drop, due to less competition and companies liquidating their existing unexploited holdings; second, until the companies can bring these alleged new resources in Brazil into production or at least map them, the price of commodities will rise as markets factor in that the supply of resources from Australia is going to drop. In other words, the Australian mining market suddenly becomes more attractive to other entrants. Smaller local companies or new entrants will expand accordingly into the market opportunity. This is theory-of-rent stuff; landlords (or mining companies) don’t control the supply of the commodity.

  69. @Andrew Reynolds

    Hobo two, you seem to assume those running various mining entities are complete fools.

    True, they are playing that part well with their ridiculous claims about the ‘sky is falling’ damage that would result from the proposed tax. But although, greedy, ignorant and unscrupulous they maybe, complete idiots they are not. But they are really banking on fools like yourself believing their nonsense.

    Way more than enough will still be left in the trough to allow them to get more than their snout’s full. Don’t worry about the risk of no longer hearing the melodious sounds of their gleeful squeals as they gorge themselves silly on publicly owned resources. The patter of little, and big, trotters around Australia’s resource trough will continue to be heard for many years to come. Along with their regular threats to dine elsewhere, because nothing will sate their gnawing hunger (or so they will continue to claim).

  70. What’s with this Hobo one, Hobo two stuff? Are you two auditioning for the roles of Vladimir and Estragon?

  71. jquiggin :
    Harry, the question is not whether the RRT is an ideal lump-sum tax (we all agree no such thing exists), but whether it is an improvement on the existing royalties system. I assume that you agree that it is. The writers of the letter, supported by economic modelling, believe that it is enough of an improvement that it can deliver both more revenue and less distortion than the existing system. If you disagree, you need to show why, not just point to the fact of imperfect neutrality*.
    * Note that Ben Smith, who made the point about non-neutrality very effectively decades ago was happy to sign the letter.

    I most certainly would not agree that no such thing as an ideal lump-sum tax exists; I’m with Frank Ramsey on this. Rather, I would agree that it only exists as an ideal, that ascertaining the amount in reality is an intractable problem, rather like the advice on the right amount to tighten a nut as being until you strip the thread, then back half a turn, or the perfect roulette system (bet red when it’s about to come up red, and similarly for black). Simple continuity arguments provide an existence proof for such an amount, even though they do not help with finding it in practice.

    In the same way, I see a royalty system as being better in (ideal) theory than the proposed tax, and the material question about the latter as being whether it can in fact deliver a better approximation to those ideal levels in practice. However, as the problem still seems intractable, I remain sceptical as to whether it would actually be an improvement after all. The current debate does nothing to persuade me otherwise, and if anything reinforces my scepticism; the burden of proof does not lie with the doubters, as asserted by “[i]f you disagree, you need to show why, not just point to the fact of imperfect neutrality”.

  72. James,
    I prefer to not trust Australia’s future to a gamble that all other potential investment targets will also hike taxes up. The Canadian provincial governments, for example, have made no bones about their glee at this move.
    In relation to the situation in 2001, I did not work for a mining company at that stage, nor do I now. I did work for exploration companies through getting my undergrad degree, though – and the effects of low prices are that simple. Exploration is the first thing to go. While mining itself tends to continue as long as it produces some profit, the exploration simply stops. I see no reason why this situation would be any different. Indeed, it would be worse as this is country specific, not general.
    I would also add that exploration is a rather unique activity. Most of it is unsuccessful. The actual exploration that goes into finding a given resource will be rebated but, AFAICS, the exploration that is not successful (i.e. most of it) is not rebated. The whole exploration industry relies on a few good strikes out of a lot of dross.
    This tax serves to depress profits out of any final mine, thus reducing the value of all exploration, most of which will not be rebated. Reduced value will simply mean reduced exploration, particularly if the exploration budget can be spent elsewhere.
    While it is also true that the price of leases here would drop, the leases themselves are not expensive and do not constitute a major cost in relation to the exploration or development budget. This component of the cost can be safely ignored.
    In any case, it is not only the large ones that can move overseas. Many of the WA junior explorers, including former clients of mine, have extensive exploration budgets committed overseas. Most are (in ASX terms at least) tiny. Any or all of them could shut down exploration here fairly quickly, relinquish the leases and walk away, spending the budget elsewhere. In fact, as I have said before, the law probably requires them to do so.

  73. @jquiggin

    I think most practical economists would have to agree with you on this issue, and to disagree with the proposition that because the tax does not constitute a perfect non-distorting pure tax it is therefore bad policy. To reject the proposal on those grounds is simply to allow ‘the perfect to be the enemy of the good’. I applaud those economist who had the gumption to sign that letter.

    If the mining lobby is ultimately successful in making the government back down, or in precipitating a change of government, their threat to democracy will have been successful and we will be a significant way down the path the Americans blazed long ago.

  74. One correction to the above – the EY document (linked previously) says that exploration will be rebated, but only when the project is abandoned, which may be years after much of the actual expenditure.
    The effects will be interesting. The incentive then (if you explore at all) will be to drill quickly and, if nothing is found, abandon it once you are reasonably sure the ground is sterile to get the rebate as soon as possible.
    A small thing, but I will be fascinated to see the cheques going to the exploration companies for this. I still doubt that there will be much, if any, exploration out of this.

  75. Andrew, no such incentive is intended or would exist in a perfect implementation of the tax. The idea is that you will be able to carry forward 40% of your expenditure at the government bond rate so if you want to ‘get your rebate’ before abandoning the project you simply need to find someone else willing to buy that future refund off you. It is ‘backed by the government’ so therefore meant to be easy to trade.

  76. “Reduced value will simply mean reduced exploration…” Dandy (aka H2), the tax is on super profits. That is, the tax is on profits beyond those required to motivate action. Suggesting that they won’t explore is a bit like saying that you have to pay more than the price asked for a good to buy the good. No only that, but the miners are getting to retain 60 per cent of those super profits which were not required anyway to motivate action. By getting rid of a fixed royalty system, marginal projects which would not be worthwhile with the cost of a royalty included, will now become viable. So some projects have the prospect of happening which would not have happened under the old regime. We would all love money for nothing and we would all be happy to get money for nothing anywhere it is on offer. They will have to make do from now on with 60 per cent of the money for nothing they were getting previously. If some other country is offering money for nothing you can be sure they will be lined up there and remain in line for their handout here.

    I always thought people like you were not in favour of supporting the bludging class? Or are you not opposed to bludging, per se, just any help for the disadvantaged?

  77. Say the 10 year Aussie bond rate is 6%p.a. Any company can offer 6%*.72 = 8.3333% p.a.(because interest payments are an expense for income tax purpose). Suppose there is no bank who would lend the proverbial “poor old Twiggy” money for less than say 10%. May I suggest there is the possibility of offering redeemable preference shares to super funds. At present (and for some time to come) 8.3% p.a. dividends on paper issued by a company that would get money from banks at 10% is not a bad proposition. I’d be very surprised if “poor old Twiggy” wouldn’t know that too.

  78. Jason,
    Provided the financier trusted the government not to change the rebate in any material way I would agree with you. Unfortunately, the very introduction of the tax indicates that they are happy to make such changes without effective consultation. I would imagine that in the next downturn (which will come) the government will be under some pretty hefty budgetary pressure to stop, or reduce, the payments that would be due under this structure to most, if not all, mining companies.
    .
    Ernestine,
    You are again presuming that there is an attraction to increasing investment in Australia after this tax is implemented. As I think I have shown the superior returns that would be likely elsewhere make a nonsense of this. Increased taxes here will mean that investing here is relatively more expensive. Sure, there will be profits still to be made in mining here, but if there are more profits in other jurisdictions then the company is obligated to stop work here and continue elsewhere.

  79. @Freelander
    Freelander, I think you are being a bit too harsh with the ‘greedy, ignorant and unscrupulous’ tag. Whilst if correctly implemented this is a far more efficient tax than royalties, it is without any question a massive expropriation from mining company investors which the Government is pepetrating in the middle of a boom. Perhaps you are right with the ‘unscrupulous’ in terms of lobbying tactics but are they really more ‘unscrupulous’ than the Government? If the Government wanted to be fairer, this could have been done very differently.

  80. @Andrew Reynolds
    I agree with you on that, note my comments above on sovereign risk. I think the reality is that because the Government are introducing this tax in the middle of a boom and imposing the tax on exising ‘super profitable’ miners there will be little if any risk the government will need to put its hands in its pockets for quite some time. Ie, there will be plenty of buyers of RPST credits from failed explorations. But who knows what would happen if China fell of a cliff….

  81. Once again PrQ thanks for your commentary on PM this evening. Most apt. I also caught your exchange with Steve Keen at The Drum. He seems to have taken a rather odd turn of late. In the past seems to have at worst put plausible arguments but on this matter, he seems to have been rather off-base. As you correctly pointed out, manufacturing and mining are scarcely comparable enterprises, at least in terms of the relationship between initial capital and recurrent investment.

  82. @Jason

    It isn’t expropriation at all, or at least not expropriation from the miners. If they were rational they would have known that they would not get to pocket what was never theirs into an endless future. As it is they are being allowed to pocket sixty per cent of what is not theirs. Great deal for them. But it doesn’t confer any property right to them. If government decides in future to only let them have say ten per cent rather than sixty per cent, they really have nothing to complain about. Not that that will stop them complaining.

    The tax isn’t retrospective. They got away with $90billion super profit last year and they get to keep that. Have you ever heard them say thanks for that?

  83. Update, Update, Update, Treasury Secretary, Ken Henry, has poured cold water on the rabble within the Shadow Cabinet and mining executives who continue to make ‘false claims’ that the RSPT would increase ‘sovereign risk’. In response Dr Henry said, ‘I don’t understand why there should be any perceived increase in sovereign risk at all, but even if there were it could only be a small fraction of that … quite considerable reduction in project risk due to government’s commitment to underwrite 40 per cent of expenditure’.

  84. Oh please spare me…since Greece we have heard nothing but fear and loathing in Las Vegas (alias Wall Street) about “sovereign risks.”

    You know far be it from me to throw the cat among the pidgeons but I personally wouldnt mind seeing Greece and a few other “sovereigns” just plain out default. We had to bail thye financial institutions out with our taxes and now they are still screaming about “sovereign risk” which is the phrase of the month.

    I wouldnt mind if global financial firms learned the meaning of taking your own risks instead of pushing it down to the humble taxpayers and taking none….thats risk shifting – thats what they do. Might do some of them good to bear their own “sovereign risks”. The reason we now have “sovereign risks” is because large financial empires got out of the GFC risk free…courtesy of you and I.

    Sovereign risk? Too bad.

  85. Update, Update, Update, latest reports indicate Australia’s powerful $1 trillion pension fund industry is not sitting pat whilst the rabble within the Shadow Cabinet and mining executives distort the facts about the new Resources Rent Tax. The latest outburst from Industry Super Network chief executive, David Whiteley, urging miners to tone down their ‘overtly political’ rhetoric, which is responsible for the resources industry sudden slump in share prices and fund values. Whiteley goes on to say, ‘What we’re having on almost every morning now and every day are increasingly hyperbolic statements being made by the Minerals Council and the mining sector itself about the potential effects of the tax’. Could not have said it any better.

  86. Andrew Reynolds @42, p2

    My suggestion of issuing redeemable preference shares pertains to an alleged financing problem of existing and planned mining projects. Specifically

    “It was worrying to hear Twiggy Forrest report to Alan Kohler on Inside Business that most of Fortescue’s bankers had withdrawn from its outstanding projects. Perhaps these bankers have just iced their finance until they get better visibility on the results of the industry’s lobbying process. But Twiggy seems to be genuinely of the view that the RSPT will have a profoundly adverse impact on Fortescue’s ability to carry out both current and new investments.”
    Source: Christopher Joye, http://www.abc.net.au/unleashed/stories/s2910009.htm

  87. @Alice

    Your post doesn’t follow from the point I was making.

    My point was that according to Christopher Joye, http://www.abc.net.au/unleashed/stories/s2910009.htm, Andrew Forrest not only wants to continue with existing mining projects but has further projects planned. This clearly contradicts the assertions that the proposed SPRT will result in the cancellation of mining projects.

    A. Forrest’s alleged problem is that banks don’t want to lend. If the proposed SPRT is the source of the financing difficulty, as is suggested in the said article, then there is the possibility of raising finance via redeemable preference shares with dividends that correspond to an after tax payment equivalent of a long term Aussie bond rate of say 6% (ie. 8.3% p.a., with corporate tax rate being 28%). Surely superfunds would be (or should be) keen to buy such paper given that there is nothing better on offer. Further, if mining is indeed risky then equity financing would be suitable. By equity finance I mean issuing shares to the public for the purpose of financing mining projects (rather than diluting existing shareholders’ interests buy issuing shares to management and directors without full payment).

  88. @Alice

    Your post doesn’t follow from the point I was making.

    My point was that according to Christopher Joye, http://www.abc.net.au/unleashed/stories/s2910009.htm, Andrew Forrest not only wants to continue with existing mining projects but has further projects planned. This clearly contradicts the assertions that the proposed SPRT will result in the cancellation of mining projects.

    A. Forrest’s alleged problem is that banks don’t want to lend. If the proposed SPRT is the source of the financing difficulty, as is suggested in the said article, then there is the possibility of raising finance via redeemable preference shares with dividends that correspond to an after tax payment equivalent of a long term Aussie bond rate of say 6% (ie. 8.3% p.a., with corporate tax rate being 28%). Surely superfunds would be (or should be) keen to buy such paper given that there is nothing better on offer. Further, if mining is indeed risky then equity financing would be suitable. By equity finance I mean issuing shares to the public for the purpose of financing mining projects (rather than diluting existing shareholders’ interests by issuing shares to management and directors without full payment).

  89. I just had a look at the EY ‘paper’. Essentially a waste of dead trees. Another waste of dead trees was an article in the Fin today written by someone identified as a tax expert and a poet. Lets hope he is a better poet.

    The profusion of nonsense being written and said about this tax proposal, particularly in the Murdoch media, is reaching a truly sickening level. As an environmentalist, I would like to see a retrospective tax on this wasteful advertising campaign that the industry has launched against the proposal. These whole page newspaper ads are simply leading to the wholesale slaughter of trees. And, as they say, death for no purpose is murder.

    And Murdoch expects people to pay online for his ‘journalism’. Why should people pay for the offerings of journalists when so many non-journalist currently provide much better and balanced reporting and analysis for free?

  90. @Ernestine Gross

    But Twiggy’s actions fit in with that all they have been doing is telling porkies for profit. The claims about financing could quite simply be more p for p. If he squeals on that topic loud and long enough, he probably hopes for concessions on those projects in one form or another. And far too often concessions happen. Shaving some points off the loans, or state or federal government providing some other form of concession.

  91. Freelander, if you follow Rudd’s logic one finds the Opposition has three different positions in relation to the new Resources Rent Tax for some little Liberal bears think mining companies pay too much tax, some think it is just enough, and some thought they should consider a profits-based tax after all. Now I am totally bamboozled as to what is the Liberal Party’s true osition in relation to the Resources Rent Tax. What a rabble.

  92. True. But history has shown that rabble do get voted in sometimes. The confused and stupid seem to like electing one of ‘their own’ sometimes.

  93. @Freelander

    EY circular. In the absence of a tax on PR, I apply the rule: Ignore all margin comments and everything in large print or highlighted in some other way (ie all ‘they’ want you to read) and search for technical detail. I found the technical part of the EY quite good.

  94. Freelander, 28, very true. You obviously have the British election, when you talk of “that rabble… (the) confused and stupid seem to like electing one of their own”; you must be talking of British geriatric (or just meanspirited) Tory voters, egged on by Ruperty Murdoch.

  95. Ernestine,
    The day I believe anything from Twiggy is the day I buy FMG shares – i.e. never. He’s way too risky.
    I will, however, listen to what BHP and Rio CEOs are saying. They can’t afford to overstate too much as they are likely to be around for the long term.
    That said, you will have to enjoy this debate without me for a while – I am off to parts foreign for a week. I may have an internet connection or the hotel may be charging the usual extortionate rate that I will not pay on principle.

  96. @Ernestine Gross
    I agree with you that Twiggy is lobbying hard, but when you say “Surely superfunds would be (or should be) keen to buy such paper given that there is nothing better on offer” there is something ‘better’ on offer – Government bonds.
    I don’t want my super fund to think preference shares from FMG are the same risk as AAA rated government bonds.
    Twiggy will need to pay a premium for the higher risk that will dilute his equity return. Therefore, if the government does not pay him that premium on the 40% they do indeed have a distroting tax.
    Mostly what he is saying is hyperbole (bankers not lending, sovereign risk etc), but there are serious issues here. I find it interesting that the 20 economists put out a letter saying we all agree on the concept (that is the easy part), but in the debate on the detail they are missing. Even on this blog people appear to be either for it or against it, there can be no acceptance that the concept is good but recongise that there are big losers in the design and extremely important design issues to be dealt with.

  97. @Ernestine Gross
    Says
    “Further, if mining is indeed risky then equity financing would be suitable. By equity finance I mean issuing shares to the public for the purpose of financing mining projects (rather than diluting existing shareholders’ interests by issuing shares to management and directors without full payment).”

    Would seem quite sensible and moderate and prudent Ernestine – but was has been demonstrated by the behaviour of senior executives, against the wishes of the majority of shareholders in many firms – we do not live in moderate times.

  98. Andrew Reynolds :James,In relation to the situation in 2001, I did not work for a mining company at that stage, nor do I now. I did work for exploration companies through getting my undergrad degree, though – and the effects of low prices are that simple. Exploration is the first thing to go. While mining itself tends to continue as long as it produces some profit, the exploration simply stops. I see no reason why this situation would be any different. Indeed, it would be worse as this is country specific, not general.I would also add that exploration is a rather unique activity. Most of it is unsuccessful. The actual exploration that goes into finding a given resource will be rebated but, AFAICS, the exploration that is not successful (i.e. most of it) is not rebated. The whole exploration industry relies on a few good strikes out of a lot of dross.This tax serves to depress profits out of any final mine, thus reducing the value of all exploration, most of which will not be rebated. Reduced value will simply mean reduced exploration, particularly if the exploration budget can be spent elsewhere.

    While I’m in no position to argue about what exploration companies may or may not do, this explanation seems incoherent. Prices of commodities can be assumed (as a first approximation) to follow something of a random walk. Given that it takes some time (years?) between exploration and bringing a mineral to market, why should the price now influence the decision whether or not to explore when the price will probably be different by the time the mine is built and starts producing?
    More generally, the point is that, given mines have a long life, miners presumably make calculations on whether or not the whole process (exploration successful and unsuccessful, development, production, etc) will be profitable based upon the average expected profits over the life of the mine, that is, on the long-term average price, not the price during boom years. Arguing that the boom years pay for the dross, as you do, implicitly accepts this; the miners are investing for the long term average return.
    If this is the case, then the RSPT, which as Christopher Joye explains chops off 40% of the profits AND 40% of the losses, will have very little impact on the long-term profitability of the sector. It changes the risk/reward profile of the sector in a more conservative direction, less risk and less profit over the cycle. As miners traditionally are roulette-playing cowboys, this may cause some of them to quit Australia, but the gap will be filled by other investors who are looking for more secure investments than classic “penny dreadful” mining stocks.
    I am quite willing to agree that the government has bungled the announcement somewhat and created needless uncertainty in the sector. But this doesn’t affect whether the tax is workable in the long term.

  99. @Jason

    You are having a conversation with yourself. Alternatively put, your post has essentially nothing to do with any of my posts on this thread. I don’t have the time or the patience to do disentanglement work.

  100. Too much time is lost in designing and marketing optimal resource taxes with supposedly neutral effects on exploration and depletion.

    If you want to put taxes up on mining, just say that is what you are going to do.

    In doing so, admit that it might cause people to change their investment plans to some degree. The price of the additional revenue is this risk and you are willing to pay it.

    Why is Rudd tying himself into knots trying to say he has found a tax without downsides?

    Too many good ideas are lost into the political mire because people are unwilling to admit that a proposal has both pros and cons, and will have both winners and losers. These effects for good and bad can be discussed and compared openly and then Parliament takes a vote.

  101. If the tax turns out to be such a terrible thing and exploration crashes won’t that be fairly easy to detect and reverse?

    If we did something to the manufacturing industry that greatly damaged it there might be difficulty rebuilding because skills would have gone offshore. With mining the loss of skills might matter a bit, but the main thing is the presence or absence of minerals, which the tax won’t change, so it would be easy to assess the damage and either reduce the rate or change the point where it kicked in. Since we can only mine stuff once our long term wealth would be pretty much the same, just somewhat delayed. Not the case with most other industries.

    Moreover, if Brazil and India follow in our wake that will make money available to be redistributed to some very needy people – a huge win for the planet.

  102. @Jim Rose

    The proposal does have pros and cons.

    It is good for Australia and may even lead to some otherwise unprofitable projects going ahead. On the con side it is bad for some greedy bludgers who were hoping to continue to get what they were getting unrequited and for free into an endless future. My heart does bleed for their loss. But I will simply have to bite my lip, for the good of the country, and get over it. I suggest they do to.

    There is nothing for Rudd to admit.

    Ken Henry has spoken, so has JQ, and we can believe them, but then, if we are economists (and even for some who are not) we don’t even have to believe them, because we know they are right.

    Rudd has done a particularly poor job of selling it. Lets hope they replace him with Gillard after the election. For starters, it should be called a user charge, not a tax because it is simply recovering money for use. Very quazi-socialist of some to think we should simply continue to give it away as we currently are, and somewhat perverted too, given to whom they think we ought to be giving it.

    I have never come across such unbridled support for totally undeserving bludgers as the legion that have presented themselves against the tax. Even farmers, who can call on many who are happy to wail in support of any of their undeserving bludging must be envious of how loud and numerous this particular support choir is. These bludgers ought to be made honorary Greek non-taxpayers as they are displaying a similar attitude of entitlement to what they don’t want to pay for.

    Good that they government is going to counter the misinformation campaign the mining lobby has started. I think it is only fair that they now raise the tax a bit more to cover the cost of this necessary information campaign.

    I am perplexed about the “too much time” comment as the whole thing is fairly straightforward. Other than the perpetually challenged (yes, I know you have pointed out they get votes too, and sometimes one of their own to vote for), the only people who seem incapable of understanding it are those who have made a positive choice not to understand it.

  103. At the RIO AGM the Hunter Valley coal miners asked questions about
    * why the managers institute a witch hunt against workers who contribute to the “Speak Out” program
    * why do some miners get paid for 45 hours work when they work 42 hours like every one else
    * how have management been able to not report reportable incidents ie safety breaches that could have led to lost time accidents or death
    * why does the company hire workers on 457 visas when there are local contractors who can do the work and want permanent jobs

  104. @billie
    So it would appear that even the employment and jobs supposedly created by mining are going to cheaper 457 workers. Ill bet Andy didnt include the 457 visa workers employed in mining in his calculation of the jobs created by Mining in Australia. What about the local contractors able and willing to supply labour?. Now I understand why BHP or RIO buys up whole towns of houses in areas where it mines. So it can fly in and accommodate its 457 cheaper labour? So not only are they stealing our resources cheaply, they are ruining whole towns for locals who cant find accommodation cheaply when rows of houses are owned by the Mining firms, the same locals who wont find employment because the 457 visa workers can be flown in cheaper.

    Ewwww – bring the tax in and fly the executives out on the 787 dreamliner.

  105. 457 labour is the type of perfectly compliant and readily disposable labour that only a truly ‘flexible’ labour market could provide. They don’t answer back and if they dare they’re back on the first plane. They’re better than slaves. With slaves at least some think you have some sort of obligation to them after you’re done with them.

  106. Having heard some of the proposed advertising for the tax on super profits it appears to be not addressing the main claims of the opponents which is gaining traction ie the impact on the superannuation funds. If people think that their nest egg is in danger it is hard to get a rational argument across.

  107. As I mentioned before – the tax increases will come to large organisations whether the TNT mob (take no taxes) like it or not. It is as inevitable as night follows day.
    Cant you see the headlines from famous economists in the future in all the post mortems of the GFC which will inevitably flow…

    “Never again will we sit back and let taxpayers funds be used to bail out banks”

    A bank funded bail out fund sounds like a sensible tax to me…

    “What I’m proposing is logical — banks paying for banks, not taxpayers,”

    http://www.chinapost.com.tw/business/europe/2010/05/28/258460/Europe-moves.htm

    No different to a mining funded resource tax. Large organisations having to give something back from their globalised super profits. We want a dig out fund. We want a bigger share of their profits to stay here. We want the global tax haven industry to suffer a major downturn like the rest of us.

    Why is that so difficult for the Miners to understand?.

    Already the first flickers of protectionism are starting in the EU with some banks in some countries complaining bitterly “why should we have to contribute to a bank bail out fund that is used to stop banks in other countries failing??.” Yet – this is the great “free movement of capital” Euro zone isnt it? The one where they have just banned short sellers. (Its not a country anymore – its a zone and they want a bail out fund – funded by banks).

    John Ralston Saul would say we have all been here before – the contraction of globalisation is about to begin.

  108. Freelander,

    A well-designed resource rent tax makes the taxpayers, in effect, a silent partner in the mining venture. The taxpayer shares equally in the losses, as well as the profits.

    How does this sharing arrangement differ from a public-private partnership with tens of billions of dollars in downside risk for the taxpayer but with no individual corporate ownership rights or other investor protections to influence risk taking and cost control for the venture? Ownership allows you to selected the uses of the asset and sell it. No such case with resource rent taxes. Resource rent taxes make the taxpayer the residual claimant on the mining lease but with no ownership rights or protections.

    As the resource tax statement of Professor Quiggin notes “If the project does not make a profit, some of its costs are potentially refundable or otherwise claimable. This means the Government shares the risk associated with exploitation of our minerals resources.”

    You may be happy for the taxpayer to postpone social spending to honour promises to write large cheques to cover the losses on the failed mining explorations of second rate entrepreneurs, I am not. Capitalism is a profit AND loss system.

    As usual, the old left, the new left and the left-over-left are like all progressives – they are junior partners in corporate capitalism, providing not always unwitting rhetorical and political cover for bail-outs and privileges for the established big businesses. You are enabling the triumph of conservatism.

  109. @Jill Rush

    Yes, Jill, the implications of the SPRT for superannuation rates of return have not been fully discussed in public. It is difficult to do this without the benefit of an econometric model that allows numerical illustrations of possible scenarios and hence informed discussions of likely outcomes.

    In principle it is quite straight forward. Keeping all else constant, the SPRT will reduce the variability of the after tax mining profits and therefore the variability of returns to shareholders. This is a good thing for individuals because their retirement benefits are more predictable. (The mantra that superannuation is for the long term is clearly nonsense for people who have a finite life.). Furthermore, if I understand correctly, the current government policy contains a redistributive element in the sense of increasing, in one way or another, the superannuation amounts of low income (low wealth) individuals. This is again a good thing because it is a small but positive step in reducing the possibly unintended negative consequences of previous governments’ superannuation policies that added to the growing income inequality. (I’d like to say here that my opinion is not a ‘bleeding heart’ one but it follows from the importance of the minimum wealth condition in theoretical models of non-dictatorial resource allocation.)

    Empirically it is not as straightforward because of ‘other things not being equal’. There are many ‘other things’. To name only a few major factors from the recent past: Events in financial markets, natural disasters, wars or other major civil unrest, and man made natural disasters, alone or in combination, can temporarily swamp or dampen both mineral price booms and the stabilising effects of the SPRT.

    The Australian government has no control over these factors. Hence the relevant consideration for policy formation is the in principle one. There is a limit to ‘evidence based’ decision making in the sense that if a new policy is indeed new and not merely a change in labels, then the empirical consequences cannot be deduced from past data.

    The current media strategy by mining companies reminds me of the brinkmanship of Telstra under Sol. Sol is gone. Telstra needs a lot of rebuilding. Hopefully, reason will dominate guts-based brinkmanship on this occasion.

  110. @Jim Rose

    Admittedly, the ideological slanging matches you are engaged in, particularly on the successor thread, are quite entertaining and, true, you couldn’t do it on your own.
    However, you come up with statements on economics that require a response for other reasons, namely they are misleading or misguided. For example, you write:

    “Ownership allows you to selected the uses of the asset and sell it.” Nice belief. Lets check it with reality.

    Corporate law is so weak in protecting shareholders’ interests that shareholders can’t even enforce payments of all profits as dividends and limits on managerial payouts.

  111. Ernestine,

    Thanks for your comments on corporate law analogies.

    It is unusual and high risk for a landlord to lease out a property – in this case, mineral leases – and then become a silent partner with the tenants but with no decision control rights at all or any method to sell their silent partnership in the property lease. Would anyone want to buy into such arrangement but a government?

    The option to sell is a very good legal protection to stem losses and punish poor profit performance. In corporate law, shares can be sold without the permission of other share owners. This is what makes them an attractive means of raising capital. You can get in and out quickly.

    There is no similar ownership opt-out protection for a resource rent tax. Governments must keep postponing social spending to write cheques to failed mining entrepreneurs.

    Resource shares are often dogs of an investment. Commodity prices collapse on a regular basis and can stay low for a long time. Oil prices have been all over the place and were low for extended periods in recent times. Resource rent taxes risk making the taxpayer the default underwriter of a high risk sector of the global share market. Who gains from this?

  112. This sharing in the losses is simply the normal tax treatment of expenditure. If you have two projects and one makes a profit and the other a loss, you pay tax on your overall net profit not on the net profit of the profitable project. This government being a partner is simply an exaggeration. This way of treating business expenditures made with the intention of making a profit is simply the way most economist think they should be treated. Businesses don’t make profit on every single thing they do. This sharing and partnership furphy is simply nonsense.

  113. Pr Q said comments closed, thread still open]:

    And the mountain laboured…

    That’s my initial reaction to this ABC report of government’s response to the Henry Review of Taxation. All that effort, five months of waiting and we get a Resource Rent Tax and some tweaks to superannuation and company tax. Just about everything else has gone into the too hard basket.

    [snip]

    The Resource Rent Tax is a step forward, especially in the current environment where a booming minerals sector is placing all kinds of pressure on other sectors. And, I guess, it wouldn’t have been politically feasible a year ago, when the miners looked to be in trouble.

    After a few weeks of looking at this RRT I have to say my initially dismissive attitude towards it was shallow, facile and unfair to Rudd who I have generally characterised as an uber-“c”onservative. The tax is a brave political move, as can be judged by the size of it intended targets and the ferocity of their response.

    You can always judge the efficacy of a policy by how much it hurts an organized interest group, going by the squeals of pain coming out of its lobbies and the hit suffered in the share market.

    The tax (it should really be called a rent hike) is a genuine effort at making the tax rates “broader and lower”, and fairer to boot. With an added bonus that it is hitting foreign share owners in the hip pocket. Always good to get the “xenophobe” vote.

    The imposition of this tax – if it passes muster in the legislature – marks the first instance in the Rudd-ALP’s swing to the Left. I have long predicted that the ALP will swing to the Left to position itself in the post-2010 political balance. They have nothing to lose by going Red, there are no more votes to be chiseled off the L/NP’s core primary vote of 40%.

    This is given that the L/NP & FF will probably lose their upper house Right-wing ascendancy in the 2010 half-Senate election. The ALP will then have no excuses to not deal with the GREENs on matters such as ecological sustainability and fiscal equity.

    So expect more moderate, Treasury-approved (Michael Pusey take that!) Left-wing policy from those quarters in the coming years. And ditto the US, whose polity will also have to oscillate some ways back to the Left if it wants to avoid Bush Ground-hog day forever.

    But I doubt that the ALP or the DEMs will give in to Left-liberals on civil liberty or cultural diversity issues. To many snarling Right-“corporals” out their, still baying for blood. I’m off to Arizona for my holidays!

  114. @Jim Rose

    Re your posts @29 and @26:

    @29: Corporate analogy? I have to correct your there. Comparing beliefs (ie your verbal theory) with observables, as I did, is not drawing an analogy, corporate or otherwise. It is the way we progress in economics and it is about as close to as we can get in economics to being scientifically minded instead of being dogmatic or scholastic.

    You say @29: “The option to sell is a very good legal protection to stem losses and punish poor profit performance. In corporate law, shares can be sold without the permission of other share owners”

    You say @26: “Ownership allows you to selected the uses of the asset and sell it. ”

    With due respect, Jim, your writing causes work – disentanglement work – because @29 you don’t specify what it is that you can sell while @26 you talk about assets.

    There are two types of ‘assets’ in economics, physical assets and financial assets. Indeed the profession has become so annoyed with the confusions created by talking about ‘assets’ only that it is by now common practice (outside accounting) to refer to financial assets as securities.

    When substituting the professional language into your statements, they read:

    Shareholders of publicly listed corporations have the right to sell their securities, called equity shares (or simply shares). They do not have the right to direct management to sell specific physical assets while the company is a ‘going concern’ and in the case of insolvency, they have the lowest rank in getting proceed from the sale of physical assets. This legal arrangement provides a chance for individual shareholders to limit their losses whereby those with better information and faster transaction technologies have a greater chance than others. The idea that the selling of securities ‘punishes poor profit performance’ is not a well developed one because it doesn’t spell out whose performance is punished. In the first instance, the selling of securities called shares reduces the financial wealth of the slower shareholders. Furthermore, it is clearly quite silly to punish the performance of ‘managers’ who happen to work in a company that is badly affected by say an earthquake and, alternatively, there is mounting evidence that the financial remunerations of corporate management is not a positive function of the profit performance. Furthermore, why should management of a company that operate in a functioning democracy that prohibits slave labour or apartheid conditions be ‘punished’ because their profits are not as high as those in other places in the unevenly developed ‘global village’? To answer my own question, these managers in functioning democracies should not be punished for not preferring slavery..

    @29 you write: “A well-designed resource rent tax makes the taxpayers, in effect, a silent partner in the mining venture. The taxpayer shares equally in the losses, as well as the profits. ”

    Further to Freelander’s reply, may I remind that ‘the taxpayers’ (ie the public) is always a silent partner in business. This is obvious because any business requires permission from the public, via the elected government, to operate.

  115. I’ve been wondering. Is anyone here being paid to speak out against the tax? I am applying the principle of charity and assuming that at least some speaking against the tax do understand it and therefore wouldn’t be speaking against the tax for free.

    If they are being paid could you refer your paymasters on to me? I would like to offer my services and am quite willing to say it’s a bad tax if a suitable price can be negotiated. I can offer petition signing services too, again for a suitable price.

  116. The Rudd government’s takeover of health should also be interpreted as a mildly Left-wing move. Something that Howard also wanted to do, which just goes to show that the Left-ward tendency is cross-partisan, ie a shift of the whole, rather than a move along, fiscal progressive function.

    Like everything Rudd does it will be micro-managed and spun-doctored to within an inch of its life. But he will have to do some Left-wing ideological entrepreneurialism, pure psephological managerialism is unpopular and hence self-defeating.

    The L/NP will have no choice but to go along with me-tooism on this issue. Which is perhaps why they are grappling for issues on which they can plausibly oppose the ALP.

    However their negative program, opposing ETS, is not really a long-term winner. And neither is their positive program of Work Choices.

    In general the L/NP’s brain snap with Abbott in 2009 has set back its electoral prospects by three years. The analogy with Latham in 2004 is irresistible.

  117. Hey Jack, we could easily have had Latham and we may yet have Cardinal Abbott. I wouldn’t rule the possibility out absurd as that would be.

  118. @Freelander

    Before you search for market capitalisation data to assist you in your no-negotiation price point, may I suggest you consider an alternative explanation. Good cash is being paid by students for latest publications that contain very very old information. Have mercy.

  119. Ernestine,

    I am not surprised that you, as a junior partner in corporate capitalism, welcome taxpayers being silent partners in every business.

    I prefer a system where private profits mean private losses too. No bail-outs, ever. Let the capitalists lose their money if they make unsuccessful or ill-advised investments. If the capitalist make profits, the tax man is waiting.

    But you want the tax office to be waiting for miners with massive tax offsets, tax rebates, tax refunds and even outright tax credits in cash for their past entrepreneurial failures. Moreover, the resource rent tax is to replace many state taxes with a single obtuse federal tax, a derivative of blackboard economics, where only one level of politicians needs to put in the miners’ pockets to get more concessions over time.

    Your remark about every business needing government permission to operate further betrays your role in defending with glee the incumbent capitalists from free competition and those pesky new entrants. You seem to be more than happy for new entrants to have to jump over more and more hurdles. Who gains from your position that every new business needs permission to open?

    Corporate capitalism arose at the start of the 20th century. Early 20th capitalism was going well for everyone except big business. The established large firms were repeatedly under attack from competition and innovation. Major businesses actively sought and supported many reforms and regulations to suppress the subversive effects of open competition and their own inefficiency.

    Big business favoured tariffs and regulation because they feared competition and desired to forge a government-business coalition at the expense of many smaller competitors and many consumers. The larger capitalists saw regulation as being in their interest, and competition as opposed to it; for smaller businesses, the situation was reversed. The workers in larger businesses also temporarily gained at the expense of others through wage rises caused by restrictions on production.

    Unions and progressive political parties became junior partners, providing the rhetorical and political cover in return for scraps from the table, tariffs and cross-subsidies, and jobs as cogs in the machine. The State functions to balance the interests of large economic power blocs while maintaining their common ascendancy in the face of potential threats from below. The push for a corporate state was from an alliance of big-business and intellectuals, eager to help run and apologise for the new system, which promised far richer niches than would a freely competitive economy.

  120. @Freelander
    Can I cut to the chase…
    Poor old Strocchi is losing it and still chasing leftie ghosts years after the culture wars…

    Jimbo is a tribal and is here to fill up the thread space on a lets help big ming make more profits to take offshore, not reinvest in the Australian economy, and fly in 452 visa workers, meaning the profits end up in the hands of the executives art collections etc…hanging on walls doing a productive zero for anything but capital gains for the execs.

    Jim Rose – you are truly sad. You have mentioned every “fear ridden” bogey man that doesnt exist. TYou have dropped the “chardonnay socialist” line, the “unions are to blame – they were co-opted”, the state is to blame “for alliances with intellectuals and big business”

    So Im having trouble discerning from this mass of comments and complaints and whinges against a variety of bogeymen, just exactly what your objection to the rent resources tax is????

  121. Jim Rose,

    Given your prose @38, it seems you were borne after your nirvana finished. How you can know, first hand, that your nirvana ever existed is a relevant question that cannot be discussed here because it goes well beyond the topic of this thread.

  122. @Jim Rose
    PS Jim give me the govt any day than free competition…that happens to have no new entrants because some large power or telecommunications company or media company (now three guesses who they might be?)…got their captive payers by the lack of competition regulation that permitted the bastards to merge into a megamonopoly…and laugh at us all the way to a foreign bank..the same sort of megamonopolies in mining who are digging deep into their deep pockets to wage a media war against a small (relatively) tax rise.

    Now do I want a State in control of how much these mega monopolies pay in tax or do I want them just to pay their tax and feel good about it (and responsible about it) and not to feel like they have a right to rip the coal or iron ore out and avoid tax and pay their execs a fortune (as is currently the case – ie a major asset strip is going on in Australia).

    I just want them to know the tax is there, realise it, shut up and pay it…and give up the media bullying about it. Does the government run the country or the mining firms?

    Im beginning to wonder. They spend more time in the media than mines.

    I also want the mining firms to think about how they are wastings hareholders funds fighting the tax with an ad campaign.

    If you think the shareholders will do badly – they are doing badly already at the hands of self remunerating directors. If no-one can control these bastards shareholders will be doing even worse. Its not the pretty 1950s world of a “sense of corporate responsibility” from entrepreneurial spirits any more. Its a “how much can we fleece these stupid shareholders” and get away with it world.

    You need a reality check and now. Its an ugly world of spin and theft we live in thanks to your precious quaint but ridiculous and naive notions of free markets that have been allowed to tie the hands of the regulators over the past three decades.

  123. Freelander,

    You as a foot-soldier of corporate capitalism do not need to know how you fit in to the larger game of political influence. Foot-soldiers never do.

    Right now, resource taxation is by state, territory and federal jurisdictions, nine in all.

    Resource taxation is a much more lively political issue in state elections.

    An example is the distribution of the Western Australian state mining tax revenues was front and centre in the recent post-election coalition negotiations.

    The resurgent WA national party was pursing a popularist agenda, demanding a bigger share of these mining tax revenues for country towns and rural areas. Naturally, the WA national party would be a counter-weight to any attempts to go soft on the revenue source they want directed to their feisty constituents.

    Out of ideological blinkers, you want to move resource taxation into the black hole of federal politics where countless issues are bundled together at elections. Even better for corporate capitalism, you want all the current mining taxes to be replaced with an obtuse tax that is a bastard son of blackboard economics.

    Your role as a foot-soldier of corporate capitalism is to push for federalisation of current mining taxes that are too transparent, too prominent in state revenues, and too difficult to capture across the current tax jurisdictions.

    Big business can chip way at this new tax once it is federalised, safe in the knowledge that their efforts will be less well noticed and there is no political party dedicated to watching the level and sharing out of mining tax revenues. State elections can be fought on mining taxes, federal elections will never be. The current federal debate is as a stalking horse for the weakness and indecisiveness of Rudd.

    Corporate capitalism does not need to ask your price. Because of ideological blinkers, you come for free.

  124. @Jim Rose
    So Jim – you say to my friend Freelnader

    “You as a foot-soldier of corporate capitalism do not need to know how you fit in to the larger game of political influence. Foot-soldiers never do.”

    So who are you…an Officer of footsoldiers?

    Oh spare us. Freelander..unleash the full force of your humorous insults on this wannabe.

  125. @Jim Rose
    Jim Rose

    You also say

    “Big business can chip way at this new tax once it is federalised, safe in the knowledge that their efforts will be less well noticed and there is no political party dedicated to watching the level and sharing out of mining tax revenues.”

    Sure Jim – if they could do this the miners wouldnt be spending seriously big money fighting the tax right now would they? You are a pain in the neck coming up with all this nonsense. And you dont answer questions. What exactly is your own personal objection to the tax? You have provided every fur[hy known to man execpt a genuine reason – oh and I note you dont answer me. Is that because my names Alice? So, not only are you elitist enough to call Freelnader a footsoldier but you dont respond to women…

    Only because you dont have a sensible response.

    Your arguments are empty. Completely blinkered one sided and empty. These firms owe a lot of tax. Id like it applied restrospectively. Its about time other businesses had the pressure taken off them if it comes down to a bunfight in Australia (which it has and which it should be).

    If you are that desperate for a board position or as media pr on a mining firm – try writing to beg. Dont refer them to your arguments here though. You wouldnt get the job.

  126. Alice,

    Your role as a foot-soldier role in Australian corporate capitalism is to stir up jingoism and economic nationalism to protect domestic corporate capitalists from foreign competition.

    Australia is resource and land rich, but capital poor.

    Local Australian capitalists can earn a good return because they get the pick of the investment and resource crop drawing from a limited pool of domestic savings. Wages are low and profits high if there is a shortage of savings to invest. Workers earn more when they have more capital to work with.

    The spoiler for local capitalists is these initially high profits were why Australia became attractive to foreign investors.

    If capital moves from capital-rich countries to capital-poor ones such as Australia, it drives profits down and wages up in the countries it goes to and has the opposite effect in the countries that supply the new capital. Foreign capital will keep flowing into Australia until risk-adjusted local and international rate of return of capital tend to equalise. Even Karl Marx agrees on this point on how capitalism works.

    To the extent that domestic political interest groups succeed in preventing foreign investment, they are benefiting the local capitalists by holding up profits and holding down the wages of the workers because there is a shortage of capital.

    It would be interesting to know how much of the clamour against foreign investment is due to left-wing ideologues who do not understand how capitalism works and how much is by local capitalists and their allies who do.

  127. Yes Jimbo. But how do I get my snout in the trough? I have to be charitable and think that you cannot mean much of what you say, and you couldn’t be saying it for free, that wouldn’t make much sense either, so how do I get paid for talking nonsense. Don’t worry, I am not going to get in a bidding war and undercut you, but I am sure your paymasters could do with another supporting voice to muddy the waters.

  128. Alice,

    There you go again.

    Like all too many on the Left, unable to hide your contempt for the rule of law and having an undying lust for show-trials, you now want retrospective mining taxes.

    When the next right wing populist gets in, and that could be real soon, and they come for you, I will only say, I told you so. Your nemesis at the door could just as easily be an ALP careerist clinging to office wanting to win the next news cycle. For a cruel and wanton example of old fashion gay bashing just to win the next news cycle, look at the disgraceful NSW ALP in the last week or so.

    You appear to want unfettered power to be vested in whoever wins the latest election; and perhaps no Senate too? For all but 3 of the last 60 years federally, the winners were perhaps not really to your political liking. This makes you a real risk taker.

    The opposition of some miners, but not others, to the new resource rent tax is due to what Gordon Tullock calls the transitional gains trap. This public choice hypothesis explores aspects of rent capitalisation.

    Those mining companies who have capitalised much of the resource rents into their share prices will fight like hell. These rents will now be taxed so these particular miners will not want to suffer a large capital loss. Some of the resource rents are not capitalised because of sovereign risk over tax regimes. Some of the resource rents are fully dissipated because of a race for rents. There was premature exploration and early depletion to grab the resource rents before rivals found them and before possible tax hikes. The preference of the miners will be for federal tax but no higher a tax burden.

    P.S. if separation of ownership and control leads to rampant managerial slack, as some on this blog have suggested with great gusto, why do mining executives care about the impact of this new tax on share prices? Why do they care about the new tax at all? The new tax will be paid by lowering dividends and cutting lower level wages. The pay-packets and office sinecures of top floor management and directors are not supposed to suffer because of inferior corporate performance. Their pay and perks are supposed to be set through collusion and top-floor intrigue, not performance. Corporate managers cannot be both lazy and unaccountable and profit driven, switching back and forth between these opposing motivational states in a special and convenient way to validate opposing hypotheses.

  129. Jim Rose, ask yourself why do corporations go for growth and who benefits and you might learn something.

  130. “why do mining executives care about the impact of this new tax on share prices? Why do they care about the new tax at all?”

    Amazing naivety.

    What does anyone care about the size of treasure they are intent on pillaging? Simply because the larger the size of the treasure the more to pillage. The mining executives can’t get their hands on money that has gone to government. There is a difference between concern and feigning concern.

  131. Economists know that mining executives, like other executives are motivated not be what is best for the shareholders, but rather by what is best for themselves. The owners are well and truly separated because most of the ‘owners’ of shares are not owners. They are simply other executives acting not for those whose money they manage but simply for themselves.

  132. Naughty Freelander, let Jim Rose think for himself about growth versus dividends and Resources Rent Tax.

  133. @Jim Rose
    Jim Rose

    you say
    “When the next right wing populist gets in, and that could be real soon, and they come for you, I will only say, I told you so. Your nemesis at the door could just as easily be an ALP careerist clinging to office wanting to win the next news cycle.”

    Are you threatening me? Here in JQs blog? Thats a very poor defence, but not out of character, for your arguments which are obviously weak. Ill refer to it for what it is – an attempt to intimidate. Then to somehow follow the comment above with a comment on “gay bashing” – well that is simply inexplicable.

    The separation of ownership and control also swings through its own cycles. At the turn of the century in the US and Canada and no doubt here also, many large entities were tightly controlled by family structures which was reduced by the mid century. Take the Rockefellers for example. However it is noted by some academics that since the 1970s – about the same time as neoliberalism set off on its fateful and dismal path – that family structures and structures of associates have again re-emerged as the controllers of large corporations. Why is it that we commonly see individuials with multiple board positions Jim Rose? I would suggest this is also not uncommon in large Mining companies.
    You neglected entirely to mention the problems of moral hazard and adverse selection, losses from the misallocation of CEO talent, failures in monitoring, the rise of incentives for CEOs who can affect the volatility of the share price, and the increasing trends to incentivise risky behaviour by”fly in fly out” CEOs rather than good governance.

    From your above post you have noted that

    “Those mining companies who have capitalised much of the resource rents into their share prices will fight like hell. These rents will now be taxed so these particular miners will not want to suffer a large capital loss.”

    This tax will not affect Mining companies share prices to the extent of “a large capital loss”. Any tax effects will already be in the share price right now – have they collapsed Jimbo? No – the share prices have not collapsed and nor will the mining companies and nor will they reduce their investments in Australia – in fact they have just made a major investment to the tune of 4.5 billion bidding for the coal rail network from the Bligh Government (who will of course bend over backwards to make sure they sell it).

    The whole argument is a red herring Jimbo. The GFC and the Greek crisis had an effect on the share prices to a much greater extent than any RRT would impose. The shareholders simply had to deal with that and they have. What is far more dangerous to shareholders who invest in mining shares is things like “dubious” announcements of discoveries (speculative rallies – Poseidon style minerals booms that dont last) from mining CEOs themselves – and the share price volatility which arises directly from these CEO conflagrations and rumours.

    It has ever been thus, and the RRT effect is miniscule in comparison.

    Just in case you dont remember – there was a time in Australia’s history when mining was for gamblers and pastoral activities were the aristocracy of Australian production.
    Well pastoral activities are no longer the aristocracy but Mining is still for gamblers. Yet the Mining firms are now trying to convince the rest of us that they are the aristocracy of Australian production.

    They were not then and they still are not now.

  134. I would also like to suggest that if the Mining firms get “too noisy” the super funds industry is likely to bring them to heel – for the latter will also be amongst the beneficiaries from this tax.

  135. In fact the super industry is already telling the Miners to tone it down

    http://www.abc.net.au/news/stories/2010/05/27/2910995.htm

    Now which industry are you backing Jim?? Mining or Superfunds? Or are your pro business arguments only for one business? Maybe you have friends in high places in Mining is my suggestion and if you are not careful you may wake up to find a funds manager knocking on your door to take you away.

  136. Michael of Summer Hill and Freelander,

    It is good to see that we all agree that it is in the self-interest of top executives that their companies grow, and that the larger is the size of their corporate treasuries, the more there is for them to pillage. My points precisely!

    I will leave it to you two and Alice to document the tiny percentage of all the billions in corporate treasure that is foregone as executive compensation in mining companies. Executive pay will be public record in their annual reports – the media uses these as their source when reporting those scandalous corporate pay packages and rich 100s.

    Most of the mining profits go offshore, as you lot and Rudd repeatedly have claimed over and over to stir up chauvinism. The local mining executives and the executives that run their Australian equity partners therefore must be truly inept at looting these billions. A few million here, and a few million there each per year – this is barely sundry expenses for the massive financial scale of mining projects.

    You appear to accept, perhaps inadvertently, that performance-based executive compensation is enough alone to motivate managers to act in the owners’ interest.

    For instance, giving stock options to managers that are spread over time instead of cash bonuses so that sustained growth in share value is in their long-run self-interest too. There are many other corporate governance and market-based disciplines on the leaders of managerial firms, but these are for another time. You fell at the first fence.

  137. Alice,

    you obviously do not know the old German joke about when they came for the communists, I didn’t speak up because I wasn’t a communist; when they came for the Jews, I didn’t speak up because I wasn’t a Jew; when they came for the trade unionists, I didn’t speak up because I wasn’t a trade unionists; and when they came for me, there was no one left to speak up for me.

    When Howard did come for the trade unionists, reason enough alone to oppose Work Choices is it is 800 pages of federal regulation displacing state laws more in tune to local needs and electoral wishes and that it is abolished the common law of employment relations such as unfair dismissal and the implied contractual duties of mutual trust and confidence, and fair dealing.

    Work Choice’s 600 pages of prohibitions included outlawing agreements of employers and employees to freely put in place unfair dismissal provisions. Long-term contracts and various other contractual clauses and implicit understandings arise to protect investments in specific human capital and other specialised assets, resolve grievances and police hard to detect individual managerial abuse within large organisations.

    Honest arguments for keeping common law protections and upholding federalism are unavailable to you on the Left because of a long history of deriding the same.

  138. Jim Rose, you claim that there are individuals on this blog stirring ‘up chauvinism’ when in fact much of the misinformation about the Resources Rent Tax is coming from chauvanists who don’t want to share the spoils. Try a little harder next time.

  139. Michael of Summer Hill,

    Chauvinism was originally an exaggerated, bellicose patriotism and a blind belief in national superiority and glory. It has come to include an extreme and unreasoning partisanship on behalf of any group to which one belongs.

    I am happy to amend to economic nationalism.

    Economic nationalism is a dangerous well for the Left to tap.

    It is just as available, once stirred, to right-wing popularists to use for their own retrograde agendas. Economic nationalism is the happy hunting ground of everyone from the Greens to One Nation.

    Many of the Left in the inter-war years found that the quickest way to win over the working class and the lower-middle classes was to tap into their rich well of nationalism, xenophobia and racism. That was how many on the Left became fascists! They found they could win power through the ballot box by combine nationalism with anti-capitalism.

    Economic nationalism is a heady wine indeed.

  140. Jim Rose, during the inter-war it was the conservative upper crust from politicians to judges that pursed eugenic racist ideas in this country. No more bulldust please.

  141. @Jim Rose
    Jim – if you want to bounce the “left” v “right” ball around and in case you didnt notice (like Rumpelstiltskin you appear to have been asleep for some years…)
    The “right” lost the last election precisely because of Howards workchoices. It was the right that was derided by the majority vote in Australia Jim Rose. It is the right that is being laughed at now. Some try to cushion the blow by blaming it the “extreme right.”
    I am not “left” Jim Rose and I was never “communist” but you can label me left if it helps you feel better over the unpopular directions the conservatives have taken in this country and others over the past three decades (and I might add directions and ideologies also followed by some Labor governments). Landslide unpopular….such that Howard lost his own seat.
    The “left” “right” argument is simplistic, like you.

  142. Alice,

    You cannot have it both ways.

    • You assert that “Any tax effects will already be in the share price right now”.

    • You also assert that “nor will [mining companies] reduce their investments in Australia”.

    Share prices fall because the estimated net cash flows of the company are forecast to be smaller. If net cash flows are smaller, that company will pay less in dividends, and investors will supply it will less capital because better paying options are elsewhere.

    The mining company will have less capital to go forward with projects, and will not be able to undertake some projects because the returns forecasted by the share market investors is insufficient to induce the supply of capital.

    The absence of resource rent taxes causes races for rents. There is premature exploration and premature depletion to beat others to the pool of rents and to pre-empt taxes. The introduction of the resource rent taxes curbs these races for rents. There will be less investment wasted in this outlet for rent seeking.

    The ups and downs of oil prices in the 1960s and 1970s are an example. Foreign oil companies were depleting middle-east oil fields as fast as they could because they anticipated nationalisation. Once nationalised, the property rights structures changed as did investment horizons. Middle-eastern oil was depleted as a slower rate and exploration was less urgent. This race for rents kept oil prices down in the 1960s, and helped boost oil prices in the 1970s once it ended.

  143. The public discourse seems to focus on ‘the mining industry’ vs ‘the government’. But this ignores many aspects of what MBA students study under the heading ‘strategic management’. In this framework, governments are only one player. To provide an example of what I have in mind, the following link may be helpful.
    http://business.timesonline.co.uk/tol/business/movers_and_shakers/article3260874.ece

    It would seem to me Marius Kloppers is lucky to have lost in his take-over play regarding Rio because, had his ambitions been satisfied, the company, formerly known as the Big Australian, might have a mountain of debt now and they would have to go cap in hand to the Government, just like small players who happen to have developed mining projects relying heavily on project finance.

  144. Michael of Summer Hill.

    So, if racist ideas were the preserve of inter-war conservative upper crust, were the ALP and unions always opposed to the white Australian policy? T

    The call in the 1901 Labor’s platform for a White Australia policy is just a recent fabrication?

    Arthur Calwell led some party other than the ALP?!

    John Curtin did not say that “This country shall remain forever the home of the descendants of those people who came here in peace in order to establish in the South Seas an outpost of the British race

    see http://www.immi.gov.au/media/fact-sheets/08abolition.htm for Fact Sheet 8 – Abolition of the ‘White Australia’ Policy.

  145. I gather Jimbo that you don’t agree with the proposition that “more regulation is often a sign of progress”?

  146. Jim Rose, during the inter-war years eugenic racism was an endemic disease amongst the upper crust fraternity who wanted to maintain their so-called status and superiority by pursuing immigration policies based on a White Australia favoring so-called Teutonic and Scandinavian superior stock. And no bull the upper crust even wanted to have British born and aliens ‘deported’ and/or ‘sterilized’ if found deficient. In short the White Australia Policy was instrumental in maintaining the upper crust’s way of life. Thank god sanity prevailed and the White Australia Policy is now history.

  147. Michael of Summer Hill,

    I have argued previously that progressive political parties, unions and intellectuals are junior partners in corporate capitalism. The ALP and the unions might have been just duped into voting again and again, election and election, from 1901 onwards for the White Australia policy? Calwell and Curtain just misspoke, as they say these days?!

    Progressive politics was infested with the most repugnant strains of racism. The past support of the ALP, and in the USA, the Democratic Party, for vicious, state-sponsored racism is well known.

    In days gone by, budding progressives not only revelled in exposes of capitalistic barons and attacks on laissez-faire economics by muckraking journalists, they also poured over racist tracts that drew on the latest anthropology, biology, psychology, sociology, eugenics, and medical science. Progressives supported eugenics until Hitler’s embrace of it gave it a bad name.

    The overtly self-proclaimed socialist parties were no better, arguing that solidarity of the working class did not extend to black people. Apartheid was found in the 1920s after a general strike by white unions led by English socialist émigrés.

    Progressives sought vast new authority for governments to manage all walks of life while at the same time weakening traditional checks on government power, including property rights and liberty of contract. This is a mixture ripe for the racist abuse that did occur time and time again. To succeed, racism requires government backing.

    Employee and customer discrimination can result in segregation.

    Employer discrimination requires the capitalists to substitute profit for some other objective. Employer discrimination will be less pervasive in more competitive industries because the robber barons have a nasty habit of wanting to hire the cheapest labour.

    If an employer refuses to hire a productive worker simply because of skin colour, that employer loses out on a valuable opportunity. Discrimination is costly to the employer who discriminates.

    There is a long history of resistance of business groups to racism because it costs them profits and denied them access to cheaper labour. Why would the bosses want to suppress competition in the labour market? How would they gain from strengthening the hand of unions?

    Unions supported racial discrimination and lobbied for Asian exclusion laws right from the start. An early example is from 1874. The U.S. Cigarmakers Union was the first to persuade manufacturers to put a union label on cigar boxes. This was to differentiate the product from those made by non-union Chinese immigrant labour!

  148. Interesting to see that Jimbo, by his silence, agrees with the proposition “more regulation is often a sign of progress”. Naturally, only a fool could disagree.

    That is one pretty thick hymn book Jimbo is singing from! Pity the tunes are not more melodious.

  149. Cigars in the 19th century to demonstrate that in the 19th century some union members were racist as were pretty well everyone in that century, and to thereby, throw mud on unionist today.

    Talk about a long bow. I love it! Have you got any more?

  150. Now that is what I call amusing! This blog is lucky to have you, jimbo. Even if you are not lucky enough to be living in the lucky country. The country lucky enough to have avoided the GFC with a timely stimulus.

  151. Jim Rose, I will not respond to your comments anymore. You state that ‘If an employer refuses to hire a productive worker simply because of skin colour, that employer loses out on a valuable opportunity. Discrimination is costly to the employer who discriminates’. Bloody racist.

  152. Wait.

    The ‘seal’ only showed the cigars produced with union labour. It didn’t demonstrate any racism in itself. Nor racism by any unionist even if the industry’s intention was anti-chinese. The racism is simply a most questionable inference.

    The long bow is even longer! How inventive!

  153. @Michael of Summer Hill

    Yes. It is only bad business not to purchase slaves if they are on offer at a reasonable price. Or to send children down mines if they are willing to do it (or their parents willing to send them forth) and a fair profit is possible (without labour laws and health and safety and other impediments to trade).

  154. Jim Rose :
    Alice,
    You cannot have it both ways.
    •You assert that “Any tax effects will already be in the share price right now”.
    •You also assert that “nor will [mining companies] reduce their investments in Australia”.

    Alice can have it both ways. The expectation of getting money they ought not to get would have been factored into their share prices and finding they would not get that money because of the tax would now be factored out.

    This would have no influence on investment, except maybe the wasteful investment they put into rent seeking which is not the type of investment we want anyway. As if anything the tax will increase investment, so it will have no detrimental impact on investment. Most economists would know this.

    We don’t want the wasteful investment they are currently making in their silly rent seeking advertisements.

  155. Alice,

    we agree that you are not of the Left.

    You do appear to have the following attributes:

    • Anti-capitalist
    • Economic nationalist and a bit of a conspiracy buff
    • Certainty suspicion of foreigners – and especially those fool enough to have money to invest in Australia
    • Blasé about the rule of law and the separation of powers
    • Keen on unfetter power for governments
    • Want to use government to punish and impoverish those you dislike – and you have a long enemies list
    • See the solution to most any problem is working out what to fear and who to blame.

    The kindest label that your mishmash of hates and fears would earn is Pauline Hanson would welcome you as a home buyer.

  156. @Jim Rose
    And none of your perceptions true Jim Rose (not one). Welcome to common sense that realises that we cant go forever on the “lower my taxes” road (both corporations and individuals).

    Maybe you would like to go and live in Greece right now Jim. It might suit you better.

  157. I wish he would come clean about who is funding him and how I can access some of those funds! “Porkies for proft” I could tell some good ones if the price is right.

    The oil currently washing on to US shores is another example of the no, low regulation folly.

    Regulation, good regulation is an important driver of human progress. What neo-luddite anti-regulation unfettered free market advocates don’t understand, is that without regulation much of the advance of the last two hundred years would not have taken place.

  158. @Freelander
    Yes Freelander – its a bigger mess than Exxon Valdez but hey – BP are still working on plugging the leak. Something tells me they wont get this leak fixed any time soon and are busy running through the cheapest fixes first.

    Tony G – go away.

  159. And Jim Rose trips up on his own arguments

    he says
    “Share prices fall because the estimated net cash flows of the company are forecast to be smaller.”

    Hang on a minute – share prices go up and down on a given day because of a myriad of nonsense “announcements” and nonsense “deals falling through” because people like Twiggy lie and make garbage press releases…..

    So your tax effects are already in the share price Jimbo and did the shares crash? – nope. You do believe that the share price on a given day reflects all available information dont you? (you would beleive in the efficiency of markets in this regard wouldnt you Jim? I dont think markets on their own are necessarily efficient. They get sucked in by charlatans all the time – but well Im sure you think more highly of market efficiency and so called market information than I do. I rather think share market movements owe more to dumb stampeding beasts than the super prescience ascribed by market worshippers like yourself.

    Announcements is all it takes and the announcement has been made and Mining shares have fallen barely a whisker (much less than the effects of the far more serious winds and gales blowing because of the GFC). The tax is a wimper and long overdue. The Miners are wasting shareholders funds objecting.

  160. Michael of Summer Hill,

    You tried to argue that for first half of the 20th century, and perhaps a little beyond, progressive parties and unions were not in fact racists. The racists, you claim perhaps out of over-enthusiasm, were instead the upper-crust of society.

    The ALP and unions supported the White Australia Policy for 65 years. Simple as that! Are you instead suggesting that this is an historical inaccuracy and that all the newspapers, books, films, Hansards and other records were later falsified?

    Too many historians mostly ignore or whitewash the leading role of racism in spawning and uniting the Labour movement. They are even more pitiful at explaining who gained from the White Australia policy and how these gains reinforced and germinated what seeds of racism that was already there in the working class.

    I also pointed out that racism is costly for capitalists so they would gain from lobbying against it. The hiring of minority workers by less prejudiced employers will slowly bid up their wages to that of comparable majority group workers.

    How would the capitalists profit from a White Australia Policy? How would the unions and employers both gain for this vile policy.

  161. Employers ‘gained’ because they didn’t like those people and they didn’t want them in the country. This is the essence of racism. Not wanting people competing your wages down is a different motivation to racism.

    What did Nazis have to gain from driving someone like Einstein out? Nothing, except it fitted in with their peculiar utopian vision.

  162. Freelander,

    How welcoming were 19th century and first half of the 20th century unions to Asian and black applicants for membership? The support of the ALP and unions for the White Australia policy does not bode well for your search for exculpatory evidence.

    Despite considerable recent rhetoric to the contrary, unions blocked the economic advance of blacks, women and other minorities. This is because once a union has raised wages above competitive levels, it must ration the fewer jobs that remain. A low cost way of doing so is on the basis of sex, family relationships or race. The union must also look for ways to suppress competition from non-union workers, new entrants and imports.

    Because craft unions have had more monopoly control over wage rates and hiring practices than industrial unions, craft unions have had more opportunities to exclude minority workers. Industrial unions have had to organise whoever was hired, and industrial companies have hired large numbers of women and minority workers.

  163. I imagine they were as welcoming as everyone else so why are you singling them out? The low skill unions are not worth worrying about, unless you are one of the many who regret the passing of slavery and child labour.

    For some reason you seem intent on bashing the poor. The real question should be why bother? I cannot think you are so stupid that you are saying what you are saying for free, so how about referring us on to your employer.

    As far as craft unions go, how about you talking about the really successful craft unions, doctors, lawyers and pharmacy? Why not give them a burst? They are the ones that have really jacked up their members wages.

  164. Freelander,

    Good to see we agree that employers do not profit from racism. Owners must be willing to pay an economic price for their bigotry.

    If an employer choose to pay more in wages to hire from a smaller pool of majority group workers, their high costs put them at a competitive disadvantage to less prejudice employers. This will slowly drive the more prejudiced employers out of business and bid up the wages of minorities.

    You say that you ‘imagine they [unions] were as welcoming as everyone else’.

    Good to see we agree that unions were racist in the 19th and much of the 20th century. Unions were a creature of the racist majority of the society around them.

    The degree of discrimination by union officials depends on their ability and willingness to exclude. Union leaders cannot stray far from the median union member’s preferences. Many unions had hard left leaderships back then too. This did not seem to help mitigate support for racism and the White Australia policy at all.

  165. Nothwithstanding the volumes written on topics of interest to Jim Rose, no argument has been forthcoming against the resource super profit tax, the topic of this thread.

  166. @Jim Rose

    I didn’t say employers don’t profit from racism. I simply recognise that the primary motivation behind racism is not simply profit. Too often they are just another set of nutters with some utopian vision, not too unlike the free market utopians.

    I note your avoidance of putting the boot into the doctor, lawyer etc. craft unions. You are very selective in your targets.

    And Ernestine is correct, so good nite.

  167. Freelander,
    If you somehow think that the White Australia Policy was an invention of the Right, I would strongly encourage you to read David Day’s excellent biography of Andrew Fisher (ISBN: 0732276101). It was written by a biographer that was sympathetic to Fisher and who obviously feels pained that he was one of the primary movers of it. I would advise you that it is not worth arguing about as the history is clear.
    .
    Ernestine,
    I have been giving some thought to your idea of using preference shares. I would suggest that convertible redeemable preference shares (let’s call them prefs for short) would probably be about right for this purpose, if the preferential cash flows were secured against the government refund. The only problem I can see with this is that the purchasers of the prefs would be taking on some real risk that, in the event of a widespread downturn in the mining industry, the government might change the legislation again to reduce or delay the payout under the 40% obligation. If, say, China descended into a full blown revolution or just a big downturn (as I would regard as a reasonable possibility, given its history of such things) then commodity prices would drop severely, resulting in widespread problems in the industry.
    Situations such as that at Ravensthorpe would become the rule, not the exception.
    In this event there would be a huge bill to the government as mining projects closed. For example, if the Gorgon project (cost of about $30bn) were to be closed then the bill could be in the order of $12bn – and that is just one project. If many projects closed then the bill would be several times greater.
    I would see the political agitation from a bill of this size as being something that a government would find very hard to ignore – and, given their history in this, something they would be likely to pay attention to.
    I am not sure that investors would feel entirely as if these were effectively government guaranteed if the “guarantee” was similar in nature to the Keating “LAW” tax legislation.

  168. Alice,

    Re post #39, BP is responsible to pay 100% of the cost of the clean-up.

    More to the point, there is a tort liability cap on economic damages of US$ 75 million.

    If anyone suffers a loss of income or property as a result of the current spill, BP is only obligated to pay a paltry $75 million in all even though the total losses may be in the billions. See http://www.nytimes.com/2010/05/02/us/02liability.html

    This regulatory privilege from Congress gives oil companies the incentive at the margin to tolerate more risk of a spill and to reduce their expenditures on prevention measures, at least at the margin. They also have an incentive to drill to deeper levels because their liability if things do go wrong is capped at the same level.

    Regulators and the industries they oversee routinely develop mutually beneficial relationships that should horrify those who idealise regulators as watchdogs.

    It is no surprise, given these regulatory privileges that BP’s chief executive has admitted to the Wall Street Journal that it did not have the technology available to stop the leak, and in hindsight it was probably true that BP should have done more to prepare for an emergency of this kind.

    As posted before, I support unfettered common law rights and a non-discriminatory democracy. Government regulation should be uniform across all industries. Free entry into all industries; and no occupational licensing too.

  169. Andrew Reynolds,

    Good point about biographies as source materials.

    Another way if is ask why did Don Dunstan move to repeal the White Australia policy clause from the ALP platform in 1966 if it was never there in the first place?

    Some on this blog might even recall watching on TV speeches and interviews where Whitlam, Hawke and others spoke with well-deserved pride of their efforts over an extended period to bring to an end union and ALP support of the White Australia policy. That alone secures them places of the highest honour in Australian political history.

  170. @Andrew Reynolds

    Hobo Two, delusional as usual I see. I never even mentioned ‘the right’ or ‘The White Australia policy’. Not so long ago racism was de rigueur, just as, for a brief time, amongst some parts of the self absorbed chattering classes, your views were. Though now, both are as dated as bell-bottom jeans.

  171. Andrew, I also spent hours studying financial statements of a select set of mining companies. (With the mining boom ‘in place’ one does get a bit lazy.) It is an interesting topic. I could see that those who have project finance have a practical problem that is independent of attitudes or even willingness to pay more for non-renewable resources, particularly if they have a financing arrangement in place that goes beyond 2012. So, I am not surprised that the initial reaction was ‘to bark NO!!’, supported with just about any argument or threat that came to mind. I have convinced myself that the Treasury and the 20 economists have an elegant and economically meaningful approach. In my opinion, it might have helped if they would have used corporate finance terminology rather than the economic notion of ‘super normal profit’ (eg one could say a resource charge or non-renewable input cost of 40% is calculated on EBIT with royalty payments to State governments being fully credited, an allowance of the long term Aussie bond rate is made and a subsidy is being allowed under specified conditions. This makes non-renewable resource input costs a function of market variables with some risk sharing with the resource owners.) The term ‘super normal profit’ is loaded or can be loaded. I made the initial suggestion of redeemable preference shares because I had in mind project financing with a finite life. When it comes to actual financial restructuring one would need to have access to the existing financial contracts and evaluate possibilities within a generally unstable financial market. I wouldn’t be surprised if in some cases convertibles would be more suitable, for both the issuer and the buyer. The instability of the global financial system is, IMO, a much bigger problem . (It was the GFC that killed the BhPB-Rio deal and BhPB was smart enough not to go for debt – at least IMHO.) I am now confident that practical solutions can be found and I hope, both the government and the industry members will not waste much time and money on sales promotion but rather spend their time on sorting out details.

  172. Ernestine, you might be right with your suggestion, but it sounds far too fair, and now I, like some others, would just like to see their eyes bleed.

  173. Ernestine,
    I note you do not address the issue I raised – the credibility of the government “guarantee” of the 40% repayment. Do you have a suggestion that may address this? I have seen it suggested that the government should issue debt instruments against verified project expenditure.
    I reiterate, though, that I am not against this as a means of taxing the industry. I am highly concerned at the level of the tax as I believe it is likely to constitute a strong disincentive to invest in Australia, meaning that future investment is likely to occur overseas.
    Do you have any thing that could address this point as well?
    .
    Freelander,
    Just as long as we cannot add that to your list of errors.

  174. Freelander,

    I am more than happy to agree that ‘Not so long ago racism was de rigueur.’

    Not mentioning the White Australia policy and the Left’s solid support for it would be cover-ups.

    You say that racism is ‘dated as bell-bottom jeans.’!

    If you do believe this, you have not been paying attention to world and Australian affairs.

    You must have simply missed the rise of Pauline Hanson’s One Nation and the current increased use of boat people as political pawns to appeal to the red-neck vote.

    How did Howard get over get over the line in the 2001 election? Border protection, perhaps?

    Hawke’s dumping of aboriginal land rights because it was not a vote winner is another example.

  175. Ernestine,
    Thinking a bit further, I see no reason why the expenditure should not be either immediately, or at least annually, rebatable. The principle would be simple – spend the money, get rebated. Make the income, pay the tax.
    I would still have a problem with the rate, but at least the government promise of the rebate would have real credibility. Additionally, the holder of any related prefs could get their interest back on a reliable basis.

  176. Freelander,

    I have no need to go into detail into the merits of a resource rent tax because it is the spawn of blackboard economics.

    The same optimal tax theory favours broad-based consumption taxes over taxes of income from labour, and wait for it, capital income taxes and capital gains should be roughly zero!!

    There is even more: a zero top marginal income tax rate!!!!!!! Mirrlees (1971), an old lefty, was horrified to find this striking and controversial result about the optimal taxation of the super-rich in his pioneering work. He must have bit his lip when he published.

    If you are serious and honest about a resource rent tax, you must also champion further radical tax reforms to show you are not an Abbot or Rudd style opportunist.

    Many who champion resource rent taxes do so because it is imposed on people that they do not like. The repeated references to the foreign nationality of many mine owners is not done to quell passions and promote a calm debate free of rancor, prejudice and xenophobia.

    Taxation is an issue for constitutional political economy. What restraints on taxing, spending and regulation promote a non-discriminatory where all are equal under the law and the passing political majority cannot exploit the minority out of self-interest or temporary or standing passions?

  177. You prefer your own form – bs economics. Doesn’t require so much knowledge or skill. Just a capacity for defecating at both ends.

  178. The resource tax is not imposed on miners or anyone, any more than putting a lock on the storeroom of your shop is imposed on thieves who then have to come to the counter and purchase what they previously purloined for free.

  179. Freelander,

    Juvenile oppositionist behaviour is unbecoming of you.

    A reply to post #47 of page 4 on the strength and breath of contemporary Australian racism would be most appreciated.

  180. Freelander,

    I have come to the conclusion that Jim Rose doesn’t know the heading of the thread and he/ she is unable to find the heading of the thread.

    Andrew,

    Today I heard an ad on the radio from the mineral sector. As long as they publish these threatening ads, I have no incentive to think aloud on possible solutions. Fair enough?

  181. Jason,

    Thanks for the pointer.

    Fane’s suggestion of auctioning mining leases to get the money up front for the Future Fund does not work for the reason set out in a posting on another blog by Winton Bates.

    Time inconsistency: governments renege on their promises after everyone has invested and contracted on the basis of them.

    The suggestions of Fane to issue the credits as government bonds and facilitating secondary markets in the tax credits promote the rule of law by making it more difficult from governments to break their word. Who could be against the rule of law? The rents are still harvested and there is more investor certainty.

  182. @Jim Rose
    Jim – it would help if you stick to the topic. You are way off. Its the rent resource tax not racism.

    If as Ernestine says, the mining industry is running threatening ads, I would suggest this is going to backfire very badly on them.

  183. Ernestine,
    I am not in Australia at the moment, so I am unaware of the content of any advertisements. I would have hoped, though, that you could not be swayed either way by an advertisement.
    .
    Jim,
    After long experience I have come to the conclusion that this is all you are likely to get from Freelander. I sometimes respond to him when it is particularly silly, but ignoring him seems to be the best strategy. There are others here (like Ernestine) who do regularly put together good and interesting arguments. Even when I disagree, the intellectual challenge is a good thing.
    .
    Jason,
    I agree that, under the present arrangements, the promises from government are not likely to hold much water. I am interested, though, in possible solutions to this problem as, in principle at least, I do not see this as a bad method of taxation. If it replaced the royalties and was (relatively) revenue neutral I think it would be one of those rare things – a tax that is better than the one it replaces.

  184. @Freelander
    Now that I know the mining industry has pulled out the big bully style media ad campaign – then the Government should tax Mining firms until they are bleeding and black and blue and begging for mercy Freelander.

    It would serve the Mining firms right for funding the likes of IPA and CIS and the AGW delusionist movement for years now. Its time their directors and CEOs were well and truly pulled down a peg or two from their overly self important and self appointed politically meddling perches.

  185. Alice,
    If the mining industry ads are going to backfire very badly on them, as you say, why is the Rudd government running counter-ads?

    If you are correct, this runs the risk for Rudd and co of over-reaching their mark and committing their reserves too early into the battle? Strategic objectives must be secured for an economy of effort to conserve resources in reserve for the unexpected, to reinforce weak areas and later to press home the advantage to final victory!

  186. @Jim Rose
    I dont agree with Rudd running counter ads Jim Rose. It made me sick when Howard ran all those ads over Iraq and the interest rate election. It makes me sick that Abbott is running ads that support the miners. It makes me sick that its all politically driven.
    The most honest man in politics is Bob Brown who reminded Rudd not to resort to the use of taxpayers funds for politically driven ad campaigns. Rudd is getting bad advice on this one.

    Just tax the mining companies and ignore them. Let the funds management industry counter ad if they want to.They will. They not only need a law banning governments from advertising – there also needs to be a law banning the opposition from using national media to advertise.

    Its gone beyond a joke the media blitzes and the political spin driven relentlessly into to the loungerooms of households at their expense. It does not look good, ever. An address to the nation which includes highlighting the unfair bullying tactics of the mining industry is far more appropriate under the circumstances.
    Rudd should just get on with legislating and do it quickly and dont back down. I think the great majority are already on Rudds side on this and Abbott is just reinforcing “the friends of big business” reputation of federal liberal. Rudd would be better off letting Abbott commit suicide.

  187. We agree – Bob Brown is the most honest man in politics.

    I do not agree with his politics, but no matter. Had the chance to watch Brown up close and under pressure in the 1970s and 1980s. A great man.

    Does Rudd have the numbers on the Senate to legislate?

    A Rudd address to the nation on the tax!? That would sink it forever given his credibility gap.

  188. @Ernestine Gross

    I agree with your sentiment, re: the mining funded ads. They are undertaking a direct attack on democracy trying to take Australia down the US style dollar democracy road where the lobbyists buy the policies they desire and the people only get a voice when things go tragically wrong, like in the GFC or when unfettered business activity results in something like the oil now washing up on US shores. Even business needs to be protected from business as the victims of that oil must now recognise.

    Hence, given the mining lobby’s actions, my position is: let’s see their eyes bleed.

    The nonsense also being talked about retrospectivity, and sovereign risk – neither apply in this case. Also, sovereign risk is almost always vastly exaggerated even when it exists. The evidence is that there is not often a large premium for sovereign risk and what premium there maybe evaporates quickly with a change of government, or even simply a change of government policy.

  189. @Jim Rose
    Oh no – it wouldnt sink Rudd – an address to the nation – but iot might sink his political advisers who advised him to go with an ad campaign. Well and good.

  190. @Freelander

    Fully concur on your point regarding retrospectivity. Since nothing happens until 2012 (year) and we are now in 2010 (year) there is obviously nothing retrospective.

    Sovereign risk: “The risk that a foreign central bank will alter its foreign-exchange regulations thereby significantly reducing or completely nulling the value of foreign-exchange contracts.”

    I fully concur on your point regardig sovereign risk. Whoever peddles the sovereign risk red herring hasn’t got a clue as to what they are talking about. This is common knowledge:

    http://www.theaustralian.com.au/business/miners-go-over-the-top-on-sovereign-risk/story-e6frg8zx-1225872750820

  191. Update, Update, Update, taxpayer funded campaign to sell the mining tax is being unfairly undermined by the Mineral council & rabble within the Shadow Cabinet. According to the latest reports, “On 20 April 2010, the Strategic Priorities and Budget Committee approved an allocation to Treasury of $38.5 million…for an advertising campaign to ensure community awareness and understanding of the Government’s planned tax package’. That is correct 20 April 2010 & no law was broken.

  192. Update, Update, Update, taxpayer funded campaign to sell the mining tax is in clear breach of an “absolute and 100% guarantee” that “every television campaign is submitted for approval before that television campaign is implemented”.
    Makes me feel all warm and fuzzy that no law was broken. Rudd just used an “out” he created in his own law to break his word yet again.

  193. MoSH,
    You would have to be wilfully blind to fail to see that Rudd has broken his “absolute and 100% guarantee” on this.
    Go ahead – has he broken his “absolute and 100% guarantee” on this? Yes or no?

  194. @Michael of Summer Hill
    Moshie – thats pathetic – you go in to bat for Labor no matter what they do (inlcuding this “ad campaign” on an RRT they dont really need at all and which tax payers pay for. Do you realise Moshie – the ad campaign makes Rudd look weak?? It makes him look like he needs to run an expensive ad campaign to raise a tax here and there?

    Not exactly what voters want from government. They want people who can make the hard calls and not back down.

    Is the government that weak they need to “sell” this tax first using our taxes to do so. No no no. This is not how government should be…undignified, scrapping around TV ads and media advisers, begging us to believe them.

    No – not a good look at all – a weak, hobbled, bullied by miners look. If I was Rudd Id sack the advisers now. Imbeciles.

    Come on Moshie…grow a critical mindset…not an Erskinville local branch member’s keen but unquestioning mindset. If you cant criticise your own party when they stuff up (and Im no fan of Abbotts because he is far far far worse) you do your party no real favours at all Mosh.

    Be prepared to stand up and say so when your party messes up. Rudd labor has with the ad campaign. Stop saying it is legal. It may be but too bad – most taxpayers know we are paying for the soundbites. Its ridiculous. Labor should just govern and do it and leave advertising to the commercial world. The ordinary person is ad saturated anyway (just tired of ads -so Govt needs to rise above and in so doing “differentiate” themselves from the powerful but ultimately just a powerful private commercial rabble. The world is full of commercial noise now. The Mining firms ads will be dwarfed by the banks advertising for loans or Nescafe or Mazda or Fosters anyway).

    And did you know Australia has the highest ad content at 18 minutes per hour anyway of all. Prime time TV sees 18 mins an hour and also we see lots of “public service announcements” which are anything but. Intrusive and likely to raise annoyance levels.

    Do the idiots in political power actually get that they are bothering us with ads and turning people off? ( I maintain they cant see themselves from within as the elctorate does – a study would be good). Thats why Rudds advisers on this mining tax should be sacked.

  195. @Freelander

    retrospectivity is hilarious – it’s like someone crying unfair coz when they first started renting in 1960 it was only 6 quid and now you want $600!

    but as every marketeer knows – you only have to keep repeating the message to sway people at the margins – even if those people don’t believe the message.

  196. @Alice “did you know Australia has the highest ad content at 18 minutes per hour anyway”
    yep we never even got to see a complete episode of the Simpson’s – even after all those repeats

  197. MoSH,
    Howard broke no law either. I take it then that you were absolutely happy about the WorkChoices ads. lol.
    Perhaps you should try a little harder. Rudd broke his word. Deal with it.
    .
    Alice,
    I criticised Howard plenty here – when I thought he was wrong. Rudd is just wrong (IMHO) more often. You should know me well enough by now that I am at least honest, even if you disagree with me.

  198. @Andrew Reynolds
    Not happy with workchoices ads by Howard. Not happy with anti workchoices ads by unions. Not happy with interest rate election ads by Howard. Not happy with Mining firms ads anti RRT. Not happy with Rudd ads pro RRT. Not happy with political ads. Not happy with number of car ads or coffee ads or bank ads. Why would I be happy with union ads, teacher federation ads, Coalition ads, labor ads.

    Heard about saturation Andy. What dont you understand about it?

    Intrusion. Too many ads without politics throwing itself at the feet of commercialism.

  199. @Alice

    The discussion of racism arose from the reaction of Michael of Summer Hill to my remarks about how the Left has for a long time pandered to the economic nationalism and the racism of the working class. The Left and the unions seemed to be doing so out of conviction rather than opportunism too back then, I might add now. The resource rent tax is another example of the Left whipping up economic nationalism to short-cut public debate.

    Michael of Summer Hill attributed inter-war racism instead to the upper crust. Freelander joined in this denial of basic Australian history. Both seemed to be less than fully aware of who supported the White Australia Policy and who might have gained from it.

    In the course of the same, Freelander seemed to show a lack of awareness of contemporary Australian racists such as Hanson and One Nation and the political manipulation of the boat people.

    Both eventually took their bat and ball and went home.

  200. I might “ad”

    Australia is also one of the few countries in the world where advertisements may appear prior to, and over the top of, the closing credits of a program, Now I know you wont like this at all but even NZ is more “ad” civilised at 15 mins per hour and as well they ban TV ads on Christmas Day, Good Friday, Easter Sunday, and also on Sunday mornings before midday.

    Imagine that – Australia not only one of the biggest privatising nations but also a nation that runs TV ads more than most other nations – now even the governments want to run ads on every sticky issue.

    Save us from the madness! Then there is Denmark – no ads. Russia – dropping ads because of a ratings drop (wonder why) – Ireland – 10 mins of ads per hour, France 9 mins per hour and can only have two breaks an hour if the show is longer than two hours, but one if its shorter than an hour.

    So…has anyone tried watching Underbelly lately? A one hour show turned into two hours by ads. So why will I be watching either the Mining co ads or the Govts ads on RRT?? Some of us actually have a life away from ads.

  201. Andrew Reynolds & Alice, for once in your life think outside the square and forget about the claptrap being bandied around. Think who actually benefits from the new Resources Rent Tax. I surely want my fair share of the spoils. Don’t you?

  202. Freelander, forget about the drip for he has no idea who or what the Protectionist Party stood for in Australia.

  203. @Alice

    I agree with you that the right ‘lost the last election precisely because of Howard’s workchoices’.

    When Howard won the Senate in 2004, I thought he would overstep himself.

    A separation of powers and an upper house elected through proportional representation to temper the temporary and standing passions of the passing majority are very important.

    Latham was not much truck as an opposition leader in 2004. The hero worship Latham got from the press gallery in Canberra did not help him win votes at all. Lost votes instead.

    There is a galactic difference between having the killer instinct needed to be a PM and coming over as a foul-mouthed school-yard bully, which Latham finally did.

  204. MOSH …

    I’m not sure whether I am getting “my fair share” of the mining price boom, but however short I am, I’m less troubled by that than the conviction that those considerably worse off than I am (that would be the bulk of the planet) are being seriously short changed n matters of vital importance.

  205. @Jim Rose
    Jim Rose
    Tonight on Q and A I finally saw a liberal liberal that I admired for having the honesty to say that the liberals have moved to far to the right and that they are losing the votes of progressive young people because they cant identify with a party that shows no compassion. Mitch Grady also commented that Malcolm Fraser did not abandon the liberals, the liberals abandoned him.
    The liberals have abandoned also the great majority of ordinary Australians generally who can no longer identify with the combative hard line approach.
    The PM does not need to have or demonstrate a “killer instinct” Jim Rose. That is your party’s mistake.

  206. Fran Barlow, you do make a lot of sense but in relation to the Resources Rent Tax the Federal Government is doing the hard yards in providing workers with greater security upon retirement. Furthermore, I see nothing wrong with the proposition of taxing those who can afford it.

  207. Norway apparently taxes their petroleum industry 78%. They have free healthcare, good public education and generous retirement benefits for their citizens.
    Yes the mining firms should share more of the profit Moshie.

  208. @Alice

    As I recall, Norway’s oil wealth boost its GDP per capita by 10 per cent relative to the OECD average. Australia gets a boost of 2 per cent or so. Natural resource wealth – first timber, then hydropower, now oil and natural gas – transformed Norway in one short century from a destitute place to one of the most affluent countries of the world.

    Norway’s prosperity is founded in the lessons of constitutional political economy.

    Having learnt the hard way in the 1970s to use a relatively small portion of the total to meet current fiscal needs, most oil revenue is set aside in the state petroleum fund, recently renamed the pension fund to reflect its intended use. The Norwegian Government’s pension fund, the world’s second-biggest investment pool, will be worth US$410 billion by the end of the decade. Their population is 4.8 million.

    The main political parties have, from the beginning, shared an understanding that the national economy needed to be shielded from an excessive influx of oil money to avoid overheating and waste.

    The high rates of oil rent taxation in Norway is worth exploring more.

  209. Alice,
    I showed a while ago how silly Norway is as an example. Perhaps you should review the evidence.
    .
    MoSH,
    Yes or no? Did Rudd break his word or not?
    Are you going to do a Freelander and say everything you can think of short of admitting the obvious?
    You are being hilarious on this one.

  210. Andrew Reynolds, the only issue at stake is whether or not laws have been broken. In respect to Norway I have no idea what you have written but last year the Government Pension Fund had a record return of 25.6% equivalent to 613 billion kroner. Try a little harder.

  211. Andrew Reynolds, unless you or anyone else have evidence to the contrary my understanding is that Rudd has not breached any law. Try a little harder.

  212. @Andrew Reynolds

    Hobo Two, you have a continual demand for affirmation more outrageous than any three year old I have ever seen. Yes, whoever you are talking about broke their word. So you are right. Yes, you did show a while ago how silly whatever it was, was. So you are right, again. And yes, you are a wonderful little child. Most amazing toddler ever seen.

    Now, I think you have been over active today, and are a little cranky.

    Now, be a good little boy and go to bed. The used newspapers are in the usual place.

  213. MoSH,
    I understand that you are not answering the question. I have to assume that it is because you are simply unable (or more likely unwilling) to admit that Rudd has done anything wrong.
    I just happen to believe that we should expect more of our leaders than that they lie, cheat and steal – and, provided that they do not contravene the law (hey – they write it, so they can always insert back doors in like the one Rudd used) that we should be content.
    I was not happy when Howard did things like this. I am not happy that Rudd is doing it. You seem perfectly content that he does so. That’s fine, just do not attempt to accuse any other politician (perhaps Abbott) of ever going back on his word ever again, as we can point back to the standards that you seem to believe are acceptable – as you have argued on this thread.
    I will keep watching for those “Update, Update Update[s]”.

  214. Update, Update, Update, Mungo rips into the selfish billionaires arguing that, ‘Just about every respectable economist in the country has endorsed (the RRT) and the only real opposition has come from the financially self-interested miners themselves and from the politically-driven coalition parties. Others have suggested that the government’s proposals could be tweaked here and there, but no-one has taken seriously the predictions of ruin the multi-billionaires are promulgating in their advertisements’. Thumbs up Mungo.

  215. MoSH,
    Nonsense. Whoever Mungo is, if he said that he is simply wrong. So far many economists have come out in support of the principle of an RRT – as, I might remind you, I have as well under certain circumstances. So far, AFAIK, very few have come out in support of this RSPT – apart from Ken Henry, its author. Even our good host here, IIRC, has not explicitly endorsed this RSPT – although (as always) I can be corrected on this.
    Perhaps you (and Mungo) should read a little more widely.

  216. Michael of Summer Hill,

    Your use of the reference “respectable economists” is not helpful to calm democratic deliberations.

    Appeals to respectability and authority in ways that suit the agendas of the speaker are common tactics of partisans of all political persuasions. They do it because it works all too often.

    The reference to “respectable economists” attacks the person instead of the argument, imputes guilt or innocence by association, and is an appeal where a proposition is claimed to be true solely because many well-educated people believe it to be true.

    Knowledge grows by the truculent and rebellious minority persuading the majority that the received wisdom is full of too many puzzles and contradictions to be right.

    Partisans of the resource rent tax should be welcoming the recent mining project cancellations. Shouting from the roof-tops that the race for rents is over for now, and premature exploration and depletion may be over. The resources will stay in the ground to earn a better return later. You cannot have it both ways.

  217. @Jim Rose

    Partisans of the resource rent tax should be welcoming the recent mining project cancellations. Shouting from the roof-tops that the race for rents is over for now, and premature exploration and depletion may be over. The resources will stay in the ground to earn a better return later. You cannot have it both ways.

    It’s a bit more nuanced than that. It seems unlikely that tghere is any more to these project cancellations than political blackmail, in which the ostensible hostages are locals employed by extractive industry. Whether they get their way or not, extractive industry will in short order, mine what they fancy is profitable and demur on what is not. Nothing in the RSPT proposal will prejudice that calculus.

    If I really believed that marginal mining projects had been cancelled on this basis, I’d see that as a good thing, and yet another reason to support the tax. Actually, the prospect that it may have the opposite result — making marginal projects viable — is one of my reservations about the tax as is the probability that it won’t at all slow the extraction of ore, or contribute to a decline in Australia’s reliance on mining income.

    Personally I’d like a tax ($35 per tonne of CO2 rising to about $100 per tonne by 2020) on Australia’s exports of coal and gas a corresponding imputed tariff based on CO2 intensity on goods landing here from places using fossil fuels. We then use that money to fund (both here and in source countries of imports) less CO2-intensive production. That might produce a decline in Australian coal and gas production, and I’d be very happy with that.

    The fight over RSPT would be nothing compared to that one.

  218. Update, Update, Update, today Rudd spelled out the need for RSPT to fund important reforms. In his speech Rudd argued that “The Government took on the challenge to reform Australia’s system of resource taxation with our eyes wide open as to the complexity and scale of the task. We saw the same scare campaign the last time a 40 percent profits-based tax was introduced for offshore mining in the 1980s – although that industry went on to flourish. The mining industry said the industry would collapse after the introduction of native title. They were wrong. The mining industry said the industry would go backwards if we abolished Work Choices and AWAs. They were wrong. The fears campaigns have been many. But we have chosen to take on this battle for reform. I believe the Government will prevail in the resource super profits tax debate – because it comes down to two simple arguments:First, we should be taxing the profits not the production of our resources. Even the mining companies accept that profits taxes are better than the current state production taxes. Second, the mining companies can and should pay a fairer share now that they are earning huge boom-time profits from minerals – minerals owned by the Australian people”.

  219. @Michael of Summer Hill
    The mining exes have been using shareholders profits for years to donate and get behind every legislarion that would lower their costs (workchoices, deregulation, anti AGW prolicies and now the super profits tax).

    And they ahve that silly Bligh woman snookered in QLD who has them all chasing after her privatisation of QLD coal loading tracks and trains…wow ..so now Bligh comes out supporting the miners and Xstrata says its canning two marginal geothermal projects in QLD because of it…and Bligh is complaining because of the “lost jobs”

    But hey – its a circus of lies…because the jobs havent even started yet, no-one has been employed…so no real jobs are lost and Xstrata is still busy in a bidding war trying to buy Blighs sell off of QLD public assets. Yes of course they can afford to be part of the bidding consortium at 4.85 billion!!!

    Its not just the minerals Xstrata wants – its QLDer’s public infrastructure and Bligh is only too happy to bend over to help them. Its sickening, actually.

  220. No wonder Rudd didnt want to attend the annual “mining execs” dinner at parlaiment house with any of them.

    I wouldnt have gone either. I couldnt have stood the smell of pure greed.

  221. Alice, using Australian Treasury data, Morgan Stanley estimates that the Federal Government would have collected an additional A$35bn in revenues from mining royalties between 2000 and 2009 under the proposed RSPT tax structure compared to the current royalty system. In otherwords, Australian taxpayers have been short changed by A$35 bn. Who is kidding who?

  222. Alice, the arguments being raised by the mining sector are misleading for mining companies will still have to pay ordinary company tax and the RSPT only applies once a mine generates super profits. This raises the question as to whether the Mineral Council is being straightforward and in fact it is all about ‘ownership’ and the 40% government stake in new mining ventures rather than the super profits.

  223. Update, Update, Update, MoSH posts yet another ALP talking point.
    Oops – that’s not news.
    .
    MoSH – perhaps you can post us a link to where “Mungo” explicitly endorses this RSPT, rather than an RRT in general. We can then have a look at his words and his reasoning and come to our own decision on the worth of those words and reasoning. Until then we just have you opinion of what he has said.

  224. Is it this one, who is referred to in Wikipedia as “Mungo MacCallum is also known for his centre-left, strongly pro-Australian Labor Party views”
    Is this the one you are relying on as able to impartially comment on the views of “…every respectable economist in the country…” on a matter of ALP policy? Really?
    BTW – “Mungo” gets no coverage over in WA or, I suspect, most of the rest of the country. So – perhaps many in NSW are aware of him, but not much of the rest of the country.
    If he is the only support you have then you are looking very, very isolated, MoSH.

  225. Good comeback there, MoSH. Maybe you could look at some readership figures for The Monthly, The Byron Shire Echo and the other widely read publications he writes for – like The Northern Star.
    Yes, everyone in Australia must know about Mungo.
    Lol.
    Perhaps you can come up with your own talking points, rather than commenting on the latest fax you get from Sussex Street.

  226. Andrew Reynolds, I’m not going to beat around the bush for Mungo is a highly respected political journalist. In respect to today’s rags you might want to read Clancy Yeates piece, ‘Companies’ threats to pull the plug are questionable’ to get a better idea of all the bulldust being bandied around by the so-called upstanding citizens within the mining community.

  227. MoSH,
    Judging by what I have read of him he is highly respected – within the NSW Right.
    Now, can you point to all of these “respectable economists” who have specifically endorsed this RSPT, rather than an RRT in general?
    There must be a lot of them. Who are they?

  228. Andrew Reynolds, I fail to understand how the Right would be attracted to Mungo’s views but they could learn a thing or two.

  229. @Michael of Summer Hill

    The press release and letter of 22 economists that started this thread supports “a resource rent tax”. It does not talk about “the resource rent tax”.

    The letter and release also says that it is “appropriate to debate modifications to the design of the proposed Resource Super Profits Tax”. The letter also calls for evidence-driven policy.

  230. Perhaps you can call up Sussex Street and ask them. I don’t see the relevance.
    Keeping to the point of this thread, can you point to all of these “respectable economists” who have specifically endorsed this RSPT, rather than an RRT in general?
    There must be a lot of them. Who are they?

  231. @Andrew Reynolds

    He also writes for Crikey. But from your last comment (and most other comments on this blog) you don’t appear to read too much given that you can’t name one respectable economist who supports the RSPT.

  232. MoSH,
    Do you mean the same Nicholas Gruen who wrote the last two paragraphs of this piece on Troppo? You mean that one that suggests that you listen to the mining industry to make changes to the tax? That one?
    Surely it would have to be someone else, as he suggests that it should be changed. Is there another Nicholas Gruen who is a “respectable economist”?

  233. With newspapers playing such a major role in your daily cycle I guess it is not surprising that you do read.

  234. @Andrew Reynolds

    Gruen’s support for the resource rent tax appears to have major design qualifications over current proposals. Specifically:

    “Henry has recently argued that because the promise to bear 40% of the costs comes from the government, it’s as good as a government bond and so the financial markets should fund it at the bond rate. Fiddlesticks. The government should stump up the cash rather than persevering with an artificial – and costly – scheme to push debt off its balance sheet.”

    Cash refunds would put Australia ahead of Norway in accepting the costs of uncertainty.

    Norwegian oil investments can be deducted against the 50% special tax on oil profits at a rate of 130%, including costs overruns.

    For exploration costs, oil companies receive a cash refund in Norway since 2005 for exploration costs. This is an alternative to carrying the losses forward.

    The combination of a high rate of taxation, generous deduction of costs, cash refunds for exploration and direct state participation in the oil business puts most of the oil industry risks with the government in Norway, relieving the companies of the same.

  235. No Andrew Reynolds, Nicholas Gruen argues that Reources Rent Tax, ‘In fact the policy seeks to put the miner in the same position it would be in if it had agreed to all Australians (though their national government) becoming 40 percent joint venturers in the project – taking 40 percent of any subsequent net profits and bearing 40 percent of the net costs throughout’.

  236. @Michael of Summer Hill

    So a resource rent tax is an unconditional taxpayer offer to share in the losses and profits of mining exploration and extraction. I hope that resources prices keep on the up and up to make this worthwhile.

    If any government made an unconditional offer to go into a joint venture with any cowboy that came along, their judgment would be questioned.

    This deal reminds of Freddie Mac and Fannie Mae. They too were willing to underwrite whatever rubbish that came through the door because the taxpayer was to pick up the tab if things went wrong. Which side of trillion is their bailout now?

  237. Update, Update, Update, latest reports indicate the Coalition will do anything even bend over backwards when it comes to money, money, money. And let’s not forget who runs this country for if Clive and Co think they can do a better job than those in government then I suggest they change careers and enter parliament, otherwise let the government get on with the job of governing.

  238. @Michael of Summer Hill
    You get teh government you acn afford to buy Moshie and Clive is buying the liberals – so lets not be under any illusion as to who really runs the country. Its Clive and his mining buddies.

  239. Update, Update, Update – MoSH pastes yet another ALP talking point in. Ho hum.
    .
    Now, MoSH, I know you have a serious difficulty reading anything that contradicts your view, but just read the last two paragraphs of the piece by Nick Gruen that I linked to and tell me where in Rudd’s policy cash refunds are covered. If you can find that in the current iteration of ALP policy then you are right. If not, you are wrong.
    Sorry – those odd little things called “facts” keep intruding, don’t they?
    Perhaps I should make it even easier for you. You claimed that Gruen is a “respectable economist” that fully (without reservations) supports the RSPT. Here is what he said about one of the more important aspects:

    Henry has recently argued that because the promise to bear 40% of the costs comes from the government, it’s as good as a government bond and so the financial markets should fund it at the bond rate. Fiddlesticks. The government should stump up the cash rather than persevering with an artificial – and costly – scheme to push debt off its balance sheet.

    I therefore renew my challenge to you. Please point out the “respectable economists” (other than Ken Henry, the designer) who fully support this RSPT. One is not enough – you said “[j]ust about every respectable economist”, so there must be a lot.
    List, please. If you cannot do that then there is no evidence that you are correct.

  240. @Andrew Reynolds

    Always be suspicious of references to respectable economists. It is a discussion stopper – an appeal to authority, rather than a pointer to additional well-documented arguments and evidence.

    Surveys of the opinions of the members of the American economic association find that the typical economist is a moderate Democrat. The data yields a Democrat to Republican ratio of about 2.5 to 1. A similar survey of the Canberra branch of the Economics Society of Australia found similar centre-left leanings, as I recall.

    On taxes, some economists get lost in the blackboard economics of optimal tax theory when its suits them.

    Others note that the size of the government increases when taxes, spending, regulation and government administration become more efficient. Inefficient taxes and government spending constrain the size of government.

    You may regard these outcomes as good or bad. At least you have had fair warning. Blackboard economics provides no such warning.

    Still others look to constitutional constraints such as a generality norm. A generality norm requires equality under law.

    Under a generality norm, governments that impose uniform regulation of all industries and use flat taxes on uniform tax bases to fund an equal-per-head demo-grant (or guaranteed minimum income) to replace all existing government cash transfers could be a very large government as a share of GDP. James Buchanan has said that all successful welfare states (such as Sweden) apply a generality norm in some form or another.

    Most politics is caused by conflict of interest and a generality norm helps alleviate this.

  241. I agree Jim, but in this case I am serious. I would genuinely be interested in which “respectable economists” support this, as I have spent the last 30 minutes or so looking and I cannot find any other than Ken Henry who is prepared to support this without qualification.

  242. @Andrew Reynolds

    Harry Truman once said “Give me a one-handed economist! All my economists say, on the one hand, on the other.”

    There are plenty of two-handed economists out and about commenting because the recovery of losses is always the twist in the tail of resource rent taxes.

    They should be refunded in cash. Norway does this since 2005 for exploration costs.

    The treatment is usually asymmetric: pay taxes now, carry forward losses at a low rate of interest. I doubt that there will be an effective secondary market for these resource rent tax losses.

    Larger mining companies will benefit from this pay taxes now, carry forward losses at a low rate of interest because they have a large portfolio of projects that should turn-up a few profitable mines. Smaller mining companies will be more disadvantaged and may have to write-off their losses.

    Without the cash refund upfront and now, the resource rent tax is a flash name to disguise a special much higher rate of company tax on mining. It will be much harder to round up them optimal tax theories to support that without waving both of their hands.

  243. Refunding in cash is a tad naive. Moving from the textbook to the real world requires some understanding of guile. Guile is what business is all about. The asymmetry is rather trivial especially given that only 40 per cent of the “money for nothing” is being clawed back. And as far as offset treatment, Treasury, or at least the ATO, knows: “that’s the way you do it”.

    Interesting non-standard meaning being given to the word ‘support’, Hobo Two. Good for you. Like Chuck Dodgson suggested, you are simply showing the word who is master. Nothing wrong with being master of your own, however little, universe.

  244. Jim Rose :
    @Andrew Reynolds
    Always be suspicious of references to respectable economists. It is a discussion stopper – an appeal to authority, rather than a pointer to additional well-documented arguments and evidence.
    …James Buchanan has said that all successful welfare states (such as Sweden) apply a generality norm in some form or another.

    Hmmm. Yes. And do as I say, not as I do…

  245. @Andrew Reynolds
    Andrew you clearly have not read the twenty two names of respectable economists on JQs statement regarding the RSPT. Yet you claim “only Ken Henry supports it” .Why do we need to make further lists of respectable economists for you? Why would we when you cannot manage to even inform yourself of the economists in support of it. Why dont you compile a list of economists, rather than noisy Mining executives, who dont support it? Better still, why dont you and Jim Rose just keep denying the facts and research and authority and expertise on the matter, and continue to create your own inventive “non facts”. Yours and Jim’s skepticism and suspician of research and expertise and authority is hardly constructive criticism, when you dont even know the arguments of the many respectable economists who do support it.

  246. Alice,
    I have read what the 22 wrote. Did you? They support the principle of an RRT on mining (as, I might remind you yet again, so do I), but nowhere on that letter do the 22 state they support this proposal.
    Try again.

  247. @Alice

    Let me write a reply for either of these two:

    “They don’t ‘support’ it and even if they do they aren’t ‘respectable’ or ‘economists’ or ‘authorities’. But wait there’s more… And even if they are respectable economist authorities how totally low of you to appeal to authorities (that are not mine, but anyway, my authorities – Friedman, Buchanan – are more correctly deities which are so much higher than authorities). Or to use facts that aren’t my facts, that is, the ones I have just made up.”

  248. @Freelander
    LoL – my thoughts exactly Freelander – hobo one, two and three …trifecta of jingoistic hobos – I say hobos because they wander in and wander out like hobos – different names, same old nonsense! The intention is – Lets just make things up (who are you to disagree with our all knowing expertless universe) and dont bother to listen to pesky “authorities” let alone economists.

  249. @Alice

    Ben Smith – one of the 22 signatories of the open letter – has an op-ed in the Australian replying to Henry Ergas that is about which particular tax Smith favoured.

    Smith’s focus is the carrying forward of losses rather than an immediate refund. Smith notes that

    “The RSPT is superior to current arrangements because the community is rewarded for the depletion of resources through the returns to its investment in their exploitation, rather than by taxing the returns on mining company investments as royalties do. However, the tax is opaque and subject to easily exaggerated fears that a future government may renege on its guarantee [to pay a share (say 40 per cent) of all exploration and mine development costs].”

    The solution proposed by Smith is the government should pay its 40 per cent share of project costs up-front, funding this by borrowing and issuing government bonds. This would replace unofficial government debt with official debt. Smith noted that it is easeir to renege on unofficial government debt.

    The Henry Review rejected the notion of upfront refunds as being potentially too onerous on the budget is some years.

    Smith’s support has major qualifications because he wants government to pay up front for its share of mining costs. Smith seems to be for the resource rent tax before he was against it, and the other way around too.

  250. I particularly like the “you debate on my terms and according to my rules which I will amend and change from time to time and don’t consider myself to be bound by”.

  251. “Major” qualifications. Not ‘colonel’ or ‘general’ qualifications? Well hardly rank? Or is it are rank?

  252. “Major” qualifications, not support along with some trivial suggested improvements?

  253. “The RSPT is superior to current arrangements because..” Sounds suspiciously like support…

  254. @Freelander

    Wrong again when you say that ‘The asymmetry is rather trivial especially given that only 40 per cent of the “money for nothing” is being clawed back.”

    If the promise to pay for 40 per cent of mining and exploration costs were genuine, take the equally trivial step of issuing government bonds that are cashed over the course of and at the end of the project, as suggested by George Fane and Ben Smith, as I recall.

    Without credible commitments such as the issue of earmarked government bonds, the so called resource rent tax is just another company tax that will go up and down with political fortunes. It will not be neutral in its effects on mining exploration and depletion.

  255. @Freelander

    Your obsessive posting of insults to me is jamming the recent comments listing today with spam. Have some courtesy to other users and the readers of other treads.

  256. @Jim Rose

    Have you considered that your comments might be interpreted as spam and that you consider “your frequent need to appeal to authority ‘ is a discussion stopper’ ” insulting because the truth of it makes your posts risible?

  257. Similarly…

    ““The RSPT is superior to current arrangements because..” Sounds suspiciously like support…”

  258. @Freelander

    You should be aware that to undermine a proposal you should first express complete support and a little while after that then start pointing to its flaws.

  259. @Jim Rose
    Like you do JR? (JR – now where have I heard that before?) So JR hones in on one very mildy ambiguous comment from one on the list of 22 respected (yes respected by lots of normal people) economists, who support the RSPT, and unfurls his little flag and shouts “victory” to his vanquished army of one supporter here (hobo two).

  260. Jim. I am sorry if you feelings have been hurt. But. You’re supplying your self parody, I am only underscoring it.

  261. @Freelander

    The only difference between the RSPT and the current company tax is you can carry forward your losses with interest.

    The RSPT is a resource rent tax if there are cash refunds on a pay as you go basis.

    The letter of 22 economists says “The following economists support the introduction of a resource rent tax to replace existing royalties.”

    The RSPT is not a resource rent tax.

  262. Good we have that clear. Due to trivial differences “The RSPT is not a resource rent tax.” But there I am, appealing to authority. Or not appealing or not authority?

  263. @Freelander

    To be a resource rent tax, does it have to be just labelled a resource rent tax by a politician, or are your standards a bit stricter?

    What are your minimum design parameters for a tax to be resource rent tax?

    What differentiates a resource rent tax from a special company tax on mining?

    If the differences are trivial, as you say, do you have any objections to cash refunds upfront for exploration and mining? The differences with carry forward losses is trivial, as you say.

  264. I didn’t know Ken Henry was a politician but, then, I learn many things on this blog.

  265. Update, Update, Update, it seems Labor has been vindicated for Clive & Co have openly admitted to exaggerating and stretching the truth. Drongos.

  266. Strictly speaking of course, it is not actually a tax. It’s more like an equity agreement in which the government offers to underwrite some of the costs and losses in exchange for some of the profits.

  267. @Fran Barlow

    Good description. An underwriting agreement.

    The snag with the current proposals is the government as underwriter pays out only if you have profits elsewhere as an offset.

    In addition, the underwriter can rewrite the rules of the game.

  268. Update, Update, Update, MoSH copies yet another fax from Sussex St.
    .
    In reality, of course, Clive’s latest update merely confirms what we all know – this is going to, at the very least, delay a lot of expenditure.
    .
    Fran,
    In practice an underwriter cannot change the rules unilaterally. As we have seen with this example, though, a government can do so and is likely to do it in the future.

  269. Update, Update, Update, according to the latest reports Rudd argues that ‘the core principles behind the tax were right and encouraged voters to take the statements of mining companies with a “grain of salt”. Yes that is wright with a “grain of salt”. Thumbs up Labor.

  270. MoSH,
    The fact that grain will in the future be mined elsewhere is neither here nor there, is it?
    .
    Is that all that was on that fax? Surely the ALP could have written a longer one.

  271. @Andrew Reynolds
    Andy “this will delay a lot of expensiture” Rubbish and you know it – but then it is your game to sell mining shares so keep looking after your share prices you speculative banker.

  272. Alice,
    Read what Clive said and MoSH appears to be happy to endorse it – even if it hurts his case. Good to see some honesty for a change.
    .
    Last month I held no mining shares at all. I have been buying a few over the last month as I am confident that Rudd will either jellyback on this or lose.
    I have never sold mining shares (or any other shares) to anyone. It is not the job of risk to sell anything at all.

  273. @Andrew Reynolds
    No Andy the job of risk management is to diversify risk all around the financial markets…and how you do that is anyone’s guess when financial empires dictate who will bear the risk and when with a posse of employees and control of large sums of money (market making sums of money). You dont know, probably any more than I do, how to diversify risk Andy. Its a great big casino and you are playing against the big guys…but who am to rob you of your claimed “risk management” expertise. I dare say managing risk will get to the money hidden under the rafters soon.

  274. @Alice

    So you say that the Resource Super Profits Tax will not delay any expenduture? Will the Resource Super Profits Tax increase mining project expenditure?

  275. @Jim Rose
    Yes I will say and no it wont delay any mining expenditure that wasnt already gpoing to be delayed for business reasons. Right now the miners are saying “well we will delay project X because of RSPT and well delay project Y due tob RSPT when they know damn well exploratory drilling at project X and Y yielded zip…and they were going to delay the projects anyway.

    Convenient – now they can blame it on RSPT and run large ad campaigns. Creepy. The Miners are running governments are they? Creepy and corrupt and their tentacles are everywhere….right into parliament house, where they have their annual greedy buffoons dinners.

    Ewww. Nasty greedy bullying companies if you ask me – with not an ounce of a sense of responsibility to this country, the Australian people, their tax obligations or to my offspring who own these mineral resources as much as these thieving bastards do. How dare they strip the resources out and contribute very little from under our noses and under our watch. Are we all wimps? (really?). Vote for Abbott then if you are wimps – he will hand it to them on a silver platter for nothing except a donation to his tiddly weird political party. Wake up Australia. The people are half asleep.

  276. Alice,
    In that comment you show how little you know about what the function of risk management is. Congratulations – ignorance really does seem to be bliss.
    .
    With the second comment you show how little you know about company announcements and the simple fact that lying in them is at least a cause for civil action and possibly criminal action, both against the company and against the directors individually.
    Well done – two outstanding examples of ignorance in two comments. I am sure you can do better, though. Try for three in two.

  277. Andy – you live in your own world not the real world…where everyone can take advantage of your useless risk management strategies… in a world where risk has become so large no amount of diversification can help your clients.

  278. Andrew Reynolds, the Government is committed to Resources Rent Tax and if everything goes to plan the initial draft of the resources tax legislation will be completed next year and a parliamentary vote taken in 2012. In the mean time the Australian public will have to choose at the next election whether or not they want ‘an increase in employer super contributions’. I know where my tick will be. Thumbs up Labor.

  279. @Michael of Summer Hill

    The RSPT is becoming increasing hypothetical because Rudd is its champion.

    Admitting that Abbot could win the next election if the latest polls are correct!

    A skilled political operator would have the ability to avoid saying that, turning temporary adversity to his advantage, and set the ground for a comeback. Little wonder that Rudd turned what he thought was a vote getter into a loser of mining and regional seats.

  280. Congratulations, MoSH.
    Several errors in there – and I cannot suggest that you put a tick down. That way your vote won’t count. Put a “1” (and then number every box) so that it does. At the moment, though, it looks like you may be in a minority.
    Another error was the date of any vote on the RSPT (if it occurs). The timetable at the moment would have the vote in the session after the next election so that the tax could be implemented in 2012. As it is a very complicated tax it will take at least that long for everyone to fully work out the impacts, hire appropriate lawyers, accountants and other advisors to get this right. At least a few of my former colleagues will be making a lot of money out of consulting on this. I might get back into business on this one too. There has to be a little sliver lining in this.
    .
    Alice,
    Diversification is not the best risk management strategy for most people. But then, you must know that, right? I mean you seem to know this business well.

  281. Andrew Reynolds, good to see your mates will be making money out of the Resources Super Rent Tax. Have a good night.

  282. @Jim Rose

    Yes. It already has increased mining expenditure. Look at all the advertising they are doing that they wouldn’t have done otherwise.

  283. Update, Update, Update, the Minerals Council of Australia has released a new television advertisement confirming Treasurer Wayne Swan’s admission that some miners could be paying up to 58 per cent tax under the Resources Super Rent Tax to pay for reforms. Thumbs up.

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