Thread: Mining Super Tax

Being a BHP Billiton shareholder I looked up the annual report for the financial accounts for F'09. Here is the link http://www.bhpbilliton.com/bbContent...ements2009.pdf

BHP Billiton pays tax in Australia see P11 "BHP Billiton and its wholly owned Australian resident entities are taxed as a single entity." On page 3 of the same report are the income and taxation figures "Profit before taxation" US$ 7700 (M), "Profit after taxation" US$ 8130 (M) due to a tax credit of US$430 (M). In the notes accompanying the Financial report there is detail of deferred tax assets of US$ 454(M). Current tax payable is on Page 23, US$1413 (M).

Now, my simple maths says that the current tax payable / profit before taxation x 100 is the percentage tax payable. Therefore 1413 / 7700 x 100 = 18.35% Please shoot me down someone using BHP Billitons own numbers because these are the figures that I use to invest my hard earned super and I would hate to think that they are not correct. There are severe penalties for lying to ASIC about this stuff.

I have written to BHP Billiton for clarification as I dont know if the current tax liability includes tax from the 2010 trading year and I would expect the GST liability to be listed separately which it doesnt appear to be. It is also not clear whether the franking is accounted for here.

Someone please shoot me down with maths because the company tax rate is 30% and the tax credit of US$454M only brings the total to 24.25%. When my PAYE rate is 40% Im concerned that I am subsidising a big company.

On a simpler point you will find if you take that subsidy approach you also subsides a lot of workers who get special tax reductions because they work in certified locations. I worked in the NT for a while and got special tax breaks because of the location.

Now you may think that you are subsidising the Big Australian but if the tax rate is less than 30% you can but blame the government as that reduction is provided by them as special tax incentives for being in those locations and lots of other reasons all legal and government provided.

UNfortunately the whole tax argument is clouded by lots of complex pieces that for one the government will not outline because it weakens their argument. It becomes hard for a government to cry that these companies don't pay full tote because the government gives them the special tax incentives.

The companies will not say too much as it clouds the argument from their side.

Sebastiaan, your figures lend support to my idea that aRRT is not necessarily a bad thing. I said earlier that the mining industry gets plenty of tax breaks from the gov.

we should get this back in one form or another over time.

True tax reform would look at all of this, and not try to bulldoze us with the RRT in its current form.

But why oh why, should anyone pay more tax after having paid tax on their income?

Originally Posted by Waldo

But why oh why, should anyone pay more tax after having paid tax on their income?

Beats me Waldo, but that is not my point.

the miners -and others- get tax breaks and other concessions. As I see it we are helping to prop up their profits. Some way or another this should come back to us.

Properly thought out, implemented and administered a RRT could do this.

Perhaps if we thought of the concessions, in whatever form they are give, as loans we might get to see this more clearly.

I don't know how to reform the tax system, but it has to be done. There was a proposal put forward by Doug ANthony some years back whereby he wanted a flat 20% tax rate. Maybe that would work.

Governments should alsolook at how much money they actually need and ways to spend it less wastefully. For instance, is there a NEED for stamp duty - of any sort on anything.

On this point, I have no objection to paying taxes. I just want to see the money used wisely.


Sorry or the rambling and jumping from point to point..

But we all get tax breaks, we all get to right off capital expenditure, so we aren't propping up someone solely.

I have two major problems with Dudd's idea:

• Dudd has decided that because he can't balance the books and to produce a budget that he has to do it by two taxes, one on mines (and it's not just the big fellas it's also on lime for cement) and one on tobacco. Without which he has no budget, or very little at least; and

• the mines pay state royalties on top off all the other taxes they pay, so they aren't getting something for nothing, we don't own the stuff they mine the miners do. If the states thought they were being ripped off before they would have increased royalties. But Rudd wants his share. And it's not a case of they should share their wealth because Dudd thinks so. They've paid for their wealth, they have invested massive capital, they pay their taxes etc., they invest back into the country (hell, take away our only real export and see how good the economy will be after that), their share price (of which there are 6 major companies on our stock market) that puts $ in our superanuation (now play with that and see what money you have at 65 - a friend of mine has lost at least $20K already because of Dudd'd grand tax idea)

A third one:
• Dudd get's the super tax through - then there exists a precedent for s/taxes on other industries and it could well happen. How much do you fiddle with an economy before you really kill it?

I respect your opinions, but there is an error of fact: "we don't own the stuff they mine the miners do". Minerals are the property of the Crown. The whole logic of the tax is predicated on getting a better price for the little bit of sovereignty we let them take away.

And they pay $1 in $7 in royalties. That sounds fair.

Canada, South American companies are rubbing their hands with glee and some economists are stupefied.

From KPMG

Tax to drag on mining industry for '100 years'

Yep. They are haggling over the price. The question now is: is Australia greedy or the other sellers the mugs? Maybe you are too young to remember when the Arabs realised they were being screwed and doubled the price of oil overnight.

the mines pay state royalties on top off all the other taxes they pay

Not according to BHP's report, ""BHP Billiton and its wholly owned Australian resident entities are taxed as a single entity."" but not the point really. I agree, Rudd is a loser. But I still think that whatever government gets in will have to increase the overall tax take to meet upcoming baby boomers as they retire. And anyone who is going to get taxed more is going to bitch about it. Me included. But with the way the economy is in NSW its all a bit arbitrary really. Our business is going to post its first loss since we acquired it and half of Silverwater will be the same by anecdote. Miners may be doing alright but we are suffering. The only consolation is the fact that those idiots who are our Govt's will have less of my money to spend. Sorry Waldo bit a of a hijack I know.

Originally Posted by Waldo

a friend of mine has lost at least $20K already because of Dudd'd grand tax idea)

Nobody has lost any money because of RSPT.

Article

For those with limited time:

During May, the industrials index of the ASX 200 plunged by 11.2 per cent

The materials sector, which encompasses the major mining companies, was down 5.9 per cent

So that means...ta-da! In the worst performance in 26 years, the mining sector still managed to whether the storm in better shape than most other industrials.

If one does the background reading you will find that:
1. The mining companies want to get rid of royalties as they are different in each state and vary per mineral extracted per state. This is a complexity to the taxation process they have to work with and basically messy.

2. No where have the mining companies objected to paying a Resource Super Profit Tax (RSPT) or call it a Resource Rent Tax, (RRT) as such. In fact they are happy with just a single tax so long as it eliminates the current Royalties tax.

3. All companies pay a base level companies tax of 30% but some have more concessions than others and these concessions are defined by the Government. Simply the Government can not cry about this as it is their own doing noting to do with the specific companies paying less.

4. The mining companies object to the current RSPT for several reasons and in a way valid.

4.1. The new tax is retrospective. This means all existing project/mines will be hit. Note these mines were designed, financed and developed on the basis of the existing taxing system and did not profit wise provide foe an additional 40% slug over 6% of base profit.
From what I have gathered so far this super profit tax is going to come in on profit before interest on financial borrowing payments are met.
The end result is less capital to spend of future expansion. Note each expansion is a new project under this RSPT. Overall not conducive to expansion.
There are many on the financial edge mines at present either within big companies or just the little miner. Most of these mines will close.

4.2. The 40% coverage by the government for a failure of a project is not being happily accepted by the various financing sources the mines use. There are a few reasons, the most notable is the lack of guarantee a government will want to fund a billion dollar loss. It would be a political death hole.

4.3. The modelling used has not reflected real world financial approached that miners use to obtain finance or conduct their operations. This has lead to some poor evaluation of the overall approach to the tax design.

4.4 The base point of 6% or the long term bond rate is very low at present 6%, and this will have ramifications on end profit and hence finance payments, and how far a company is willing to expand with new projects. Reduce the profit and hence you reduce future operations capital.

4.5 The real lack of consultation with the industry by hennery in his report that developed the concept of the tax. The lack of consultation by the government with the mining sector when drawing up the tax model.

5. The mining sector would be happy with a RSPT based along the lines of the PRRT. Note this tax has a 40% profit loading and also has no retrospective provisions. It also has a base profit line at Long term bond rate plus 5 odd percent making it at roughly 11-12 % before the super profit cuts in.
Notice the off shore petroleum industry does not pay royalties as these are in federal zones not state ones.

Of topic here:
With company tax being reduced from 30 to 28 odd % as the base rate will only affect those companies which are incorporated etc. So little ones which are say family run business, partnerships etc will not get this reduction. Now throw in a compulsory super from 9 to 12 % that these little guys will have to pay and they will get hit badly.
Bye-bye little guy.

Back to topic:
If Rudrless and his kitchen cabinet has bothered to sit down with the mining industry by now he would have had his RSPT, his 40 % and his budget balanced. At present he has a whacking hole in his budget through gross arrogance.


Though some may not realise it such mines as the cement mine at Ardrossan, the iron mine at Whyalla will possible due to the current version of the RSPT go bottom up. This is because the mines sell the mineral form one department to another at production cost. If it was at market cost they would not be able to operate.
A similar concept could be applied to the Pt Augusta power station and its Leigh Creek coal field.
That is 3 industries within SA at possible closure risk.

Sorry went on a bit..

Originally Posted by q9

Nobody has lost any money because of RSPT.

Article

For those with limited time:




So that means...ta-da! In the worst performance in 26 years, the mining sector still managed to whether the storm in better shape than most other industrials.

That means stuff all if you are relying on some form of managed retirement fund as you only source of income. Share value dictates you available $ worth.
If that value goes down you have lost that much. It can only be regain if the share value goes back.

Well done Cultana!

Those are the sort of facts we need to consider.

If anything this RRT proposal has simply shown up the incompetence of the gov. and its boundless arrogance.

What is needed, apart from decent tax reform, is for the Krudd government to be given its Swan song at the next election.