Update: A deal was secured on the 2nd July 2010.
Yesterday morning on the regular political panel segment on ABC Canberra 666 Breakfast with Ross Solly, the extent of the Liberals shameless departure from the truth was exposed during the debate about the impact of Labor’s proposed resources super-profits tax (RSPT).
I want to make sure that the people I represent in the ACT are across the facts of the matter.
Liberal’s fiction
The Mining Industry and the Liberal Party claim the RSPT will undermine the viability of mining investments for a company because it reduces the profitability of successful projects.
Fact
The RSPT only impacts on individual projects that actually achieve a super profit made from the exploitation of Australia’s non‐renewable resources. . It will be introduced on 1 July 2012 at a rate of 40 per cent on profits.
http://www.futuretax.gov.au/documents/attachments/10_Fact_sheet_Resource_Profit_Tax_Final.pdf
Liberal’s fiction
The increased tax as a result of the RSPT on successful projects will remove the capacity to offset the losses of failed projects and therefore inhibit investment.
Fact
The new tax arrangements LOWER the financial risk of new projects and increase investment in them. A company can transfer losses from one project to another for income tax purposes, thus effectively getting tax back on unsuccessful projects.
The RSPT package provides additional tax relief for failed projects. So there is NO necessity for super profits to cross subsidise the viability of failed projects, as the Liberals claim.
Liberal’s fiction
That small business will suffer with the increase in the supply of construction materials as a result of flow-on cost increases of raw materials (derived from mining resources) as a result of the RSPT.
Fact
Low value commodities, like sand and gravel, have been included at this stage because it is important to explore the possible benefits that such industries might receive from the RSPT. Consultation with the industry is underway. The Government has stated that it will exclude industries from the RSPT if there is no net benefit from their inclusion.
Low margin commodities are being considered for inclusion because they may benefit from coverage by the RSPT. Low margin commodities that are currently subject to royalties could win under the RSPT because they are likely to have little or no RSPT liability, while they would have their royalties refunded.
Liberal’s fiction
That the Oil and Gas resources rent tax introduced in the 1980′s is different to the RSPT and they can’t be compared.
Fact
When a resources rent tax was applied to the oil and gas industry by the Labor Government, a similar fear campaign was run by that industry. Their claims came to nothing.
Liberal’s fiction
The liberals have made the extravagant claim that the RSPT will increase all prices
Fact
This is just made up. There is no relationship with mining profits and prices. Treasury secretary Ken Henry outlined this specifically in Senate estimates this week when he said he learnt in high school economics that a tax on profits does not increase prices.The introduction of the RSPT and the cut in company tax will reduce consumer prices, by making our economy more competitive.
Royalties currently operate like a sales tax, applying to total revenue for a mine. By contrast, the RSPT only taxes mining profits. This means that lower profit mines are likely to pay less tax, rather than more tax, under the RSPT, once their royalties are refunded to them and they benefit from the 28% company tax rate.
Independent modelling by KPMG Econtech shows that the Government’s tax reform package – including the RSPT and our cuts to company tax – will reduce consumer prices, relative to nominal wages, by 1.1 per cent over time.
Here is the link to the Government’s frequently asked questions web page if you would like more information:
http://www.futuretax.gov.au/pages/FAQs.aspx
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I was hoping for a brief clarrification as to why the tax will be applied on a project to project basis, rather than to the profits of a mining company as a whole?
Wouldn’t the tax, if applied on a project to project basis, be far easier to circumvent with creative accounting?
For example, say a mining company owns three mines; two of these are marginally unprofitable but one is hugely profitable. The profits from this third mine substantially offset the loss on the other two mines and allow the company to make a “super profit” across the three ventures even though only one of them is at this time profitable.
In this circumstance, wouldn’t the mining company simply transfer all its assets from the unprofitable mines to the profitable mine, which would then loan those assets back to the unprofitable mines. In this way, the company would be able to reduce the profitability of the third mine, perhaps enough to circumvent the tax, without reducing the profits of the company altogether.
If, on the other hand, the tax was applied to the ‘super profits’ of the company as a whole, there would be no scope for this kind of creative accounting; the company’s ‘super profits’ would be taxed in the same way no matter how that company distributes their assets, incomes and expenditures.
A clarrification of this point would be much appreciated.
Thanks
Alex, I have just updated the post to include this link, which hopefully will answer your question with the necessary detail. http://www.futuretax.gov.au/documents/attachments/10_Fact_sheet_Resource_Profit_Tax_Final.pdf
Brilliant example of Gov2.0 at its finest. Thanks Kate.
As an aside, I wonder if this sort of interaction will survive when/if the Libs get back in. Gov2.0 can be seen as a threat to powermongers, ie to many traditionalist/conservatists in the big end of town.
You should ask Stephen Conroy about “shameless departure from the truth” he seems to be pretty good at it and very good at providing outright lies that just expose his ignorance. You might want to get him to do some research about https before making stupid comments.
“Liberal’s fiction
That the Oil and Gas resources rent tax introduced in the 1980’s is different to the RSPT and they can’t be compared.”
Your “factual” response to this is the only piece of fiction here. It would help if you used actual FACTS and let people know that the petroleum profit does not cut in until 15% rather than the 6% under the RSPT. They ARE different and can’t be compared. You are also incorrect that the industry complaints “came to nothing”. A little research will tell you that all overseas based petroleum companies packed up and left, followed by BHP. The North West shelf survived due to very generous subisides. And we are currently facing a $25 billion dollar hydrocarbon shortfall. THOSE are facts, so the line you spin is either pure lies or a shockingly uneducated point of view.
Fact
If a company can not make a suitable return it will not invest in new projects.
Fact
That means less jobs for Australians?
Fact
You cannot categorically ensure us that Australians will not lose their jobs because of this new tax.
Fact
The resource tax that was applied to the oil and gas industry was different to the proposed RSPT. Clearly you dont understand risk free investment and the return required to invest. So clearly you dont understand both the proposed RSPT and the tax applied ot the oil and gas industry.
Dave L: Some Australians will lose jobs. That is a good thing, where they are engaged in jobs where their industry is harmful to long-term human viability. Some jobs are destructive. They have to go. Get over it.
A rather shortsighted point of view. You wouldn’t be sitting in front of your computer able to respond to this if it were not for the products of the “harmful industry”. Your life as you know it would not exist. Every industry is a harmful industry – the bottom line comes first because that is what the law requires. So unless you live in a cave and grow your own veggies, you are also employed in a destructive industry at some level. Feel free to leave your destructive job… or get over it.
There are degrees of destructiveness of jobs. If you read the earlier posts you will see that the discussion is about some jobs, not all jobs. Your implication that every job has an element of destruction is probably true, but to then suggest all should leave them is rather extreme, and pointless to say the least.
I was merely pointing out that your call for destructive jobs to go is misplaced since virtually all jobs are destructive. It was your (pointless and extreme) suggestion that such jobs should go.
Hi all,
I was advised of the following in response to the concerns raised about the RSPT when compared to the PRRT:
Hope that helps clarify some of the similarities and differences between the two systems.
Many thanks for your comments,
Kate