Tuesday, May 04, 2010

Muddle headed tax policy?

Digging through the mining industry’s lies – Crikey

Last Sunday the Rudd government announced its response to the Henry review into the Australian taxation system. Of over 138 recommendations, just four will be implemented. Is Kevin Rudd too timid to propose radical tax reform in an election year? Its centrepiece will be a 40 per cent tax on mining industry profits. The response to this proposed new tax has been mixed. On the one hand, it can be argued that since Australia's mineral wealth belongs to all Australians, and not just multinational mining companies, the revenue raised will be used to benefit millions of ordinary Australians. Then again, the mining industry earns Australia billions of dollars in export income, and employs thousands of people. According to some economists, China's appetite for our mineral wealth was one of the factors that kept Australia from going into recession during the global financial crisis. This may just be hyperbole, but to heavily tax such a viable industry will put it at risk. Massive projects are now believed to be on hold, and mining companies are threatening to move their operations elsewhere. The value of mining stocks has dropped, affecting shareholders and the retirements savings of superannuants.

Of course, the implementation of this tax depends on the reelection of the Rudd government, which is by no means guaranteed, nor is its passage by the Senate, and the Liberal opposition has already vowed to block it.  Kevin Rudd often talks about making housing more affordable. To match his rhetoric with action, one thing he could have done was end the negative gearing of residential investment properties, which is one of the factors in Australia's current housing affordability crisis. Perhaps that's in the too hard basket for now. Indeed, we live in interesting times.

These are my initial reactions to this announcement. I'll leave expert analysis to the experts.


JD Curtis said...

Watch for the dodgy modelling from economic consultancies designed to back up the wild claims

This is nothing. Absolutely NOTHING Ross, in comparison to the Obama Administration and their Walt Disney, Dreamworks-like revisionism of the American economy.

I must admit though that when I first saw this entry and the link that you provided, my mind went immediately to...

But if I work all day on the blue sky mine
(There'll be food on the table tonight)
Still I walk up and down on the blue sky mine.
(There'll be pay in your pocket tonight)

Let's not tease with intro's such as this. Shall we? ;-)

His Lordship The Gun-Toting Atheist said...

Interesting. A few summers ago in the US, when gasoline went up to 4 dollars per gallon, there were talks of taxing oil companies' balooning profits. And the same arguments were brought up; they employ people, if they get taxed they'll just pass on the extra expense to the consumer, etc. In the end, I don't think anything happened.