How is that mining tax, not delivering a single dollar. Readers of my blog would have seen me complaining about this tax going exactly the wrong way. I claimed that the motives were fair enough (ie spreading the wealth of the mining boom) but the delivery was ridiculous and exactly the wrong way. The right way would have been to have gotten rid of the company tax in its entirety, ALL LEASE FEES AND ALL AUCTIONS and increased royalties. That deflates asset prices, reduces banker involvement dead losses, and improves resource allocation.
I expect the civilians to get sucked in by things like this. I’m not raining abuse on those outside of the economics game. But lets just contemplate the incompetence of the Australian economic profession in this regards.
Also there is no excuse in saying that they couldn’t have gone the higher royalties road because of royalties being a state affair. There is work arounds there. The encouragement of higher state royalties in exchange for them to run large surpluses and a few other workarounds could have delivered the same effect. Note that incompetent lunatics like former Treasury head of department, Ken Henry, did not understand enough to speak of matters the way I have.
Now it must be admitted that I didn’t predict that the super-profits mining tax would deliver not one dollar of revenues. This is what has just been announced for the first quarter of this mining tax. So I didn’t predict this exactly. But economic science more generally tells us that this tax would do a great deal of damage and yield very little taxes. Whereas economic science tells us also that increasing royalties, and getting rid of the company tax for the extraction industry (as well as auctions and lease fees), could potentially do a great deal of good AND RAISE EXTRA REVENUE AT THE SAME TIME. Actually I think only Philomena got it in the end. The main thing isn’t learning economics it seems. The main thing is for catallaxy types to UNLEARN what they think they know.
Statements made by me on this site to do with the stupidity, not of motive, but of delivery, with regards to the mining tax.
The mining tax was anti-economics idiocy. You have stealing. Then you have stupid stealing. The miners were right to defeat that tax, in their own self-interest, but also on patriotic grounds.
Taxing retained profits is always a sin. It ought never be under consideration. The arguments made for spreading the wealth around ought to have been directed at cutting the tax on retained earnings, but beefing up the royalties charge.
Look I admit it. I wouldn’t know my retained earnings from my royalties.
This is significant?
By: Philomena on August 2, 2010
at 7:49 am
Yeah very significant. Because they could have reformed the mining industry, made it more amenable to the little guys, made it less offensive for foreigners to be taking up tenements, from a national interest point of view ….. They could have done all that AND INCREASED TAX REVENUE. But their advisors know nothing. The loyal opposition of their advisors are useless. And for all I know the bankers exert influence to keep the crap setup we have now. If you increase the royalties with some discrimination.1. You are guaranteeing that if the project goes ahead the public purse comes first.2. You reduce the initial investment needed to get a project started. The increased royalties, means the capital value of these remote natural resource properties falls close to zero.
3. Since the upfront cost of getting started is close to zero, the little guy doesn’t need to go to the bank to get started. He can merely homestead some remote resource.
4. It cuts out the bankers. In this context the deepest pockets can be seen as bankera-and-bigshots rolled into one. Because the entity with the deepest pockets gets the bankers cut and the miners cut. And runs home with it.
5. Extra royalties wipes out most of the bankers cut.
6. The entity with the deepest pockets is Beijing. Leaving things as they are mean we will be robbed of our resources paternity. The communists will in effect wind up being favoured with what nature chose to favour AUSTRALIA-with.
7. Ergo, they had a good idea, as far as thieving ideas are concerned ….. but somehow they lacked the advisors to make that idea work, and to actually make wealth-creating reform in the process.
Andrew Forrest (I think his name is) was on TV. He said he’s got six more projects like the one demonstrated, that he could go ahead with. But he’s got no way to finance them under the Labour plan. But if you got rid of any taxes on retained earnings, and beefed up royalties, either he or someone else could go ahead with all these undertakings. The finance cost would actually be less. Because the capital value of acquiring the tenements would have collapsed.
09 Feb 2012 7:10:45pm
Why Sinclair do you “…doubt the mining tax will make much revenue at all…”? “Professor in the School of Economics” – a peer-reviewed reference please!
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Graeme Bird :
09 Feb 2012 7:50:10pm
Its not going to create much revenue, since all a profits tax does is encourage more spending, wherein tax deductions can be made against the accounting profit. So we don’t need peer review for this conclusion.
However higher royalties would merely reduce the capital value of projects, cut out a lot of dead-losses through excess banker involvement and so higher royalties and lower company tax was the right way to go. The public service has the uncanny ability to always move the wrong way.
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Graeme Bird :
07 Mar 2012 5:34:35pm
Its not that one is unsympathetic to the points that Swan is trying to make. But he’s an economic illiterate.
“Too bad he didn’t show the same fighting spirit in the dying days of the Rudd government when the original and much more robust mining tax was dumped unceremoniously.”
But that was a really really bad tax. We know what tax most closely fits with economic rent. The tax is royalties. Royalties and royalties alone. The idea was to get rid of any profits tax, any auctions, any lease fees, and to boost up royalties through the roof. Instead Labour went the exact wrong way with it. The entirely wrong direction.
Just because you make some good points, and have valid concerns, doesn’t make it okay to pursue those points and concerns with inept and harmful means. And here we have Swan pulling the same incompetent act again. Taking a swipe at a businessman, who had come out of nowhere. Clearly a high-achiever. Of all the people to pick on, the dimwit picked on Andrew Forrest. Can we not find someone who isn’t an idiot, and promote them near the top of Labour? I don’t think this is too much to ask.
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Well there you are. One of the best economic analysts in Australia and still the webs most holistic prophet. Very few people really understood what the hell I was talking about. But exempting the extraction industry from the company tax, and increasing royalties has the possibility of creating greater economic wealth at the same time as raising tax revenue. Whereas the labour parties opposite approach can destroy economic wealth and not raise any tax revenue. No-one else pointed this out. If you think Sinclair pointed this out you’d be wrong. He was simply siding with the mining companies and had no insight into the greater potential of increasing royalties and wiping out the profits tax for these companies entirely. He’s a lickball partisan and no economic technician.