Monday, May 3, 2010

Kevin Rudd - the opportunistic tax parasite

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Kevin Rudd will probably go down in history as Australia's worst prime minister. So what's the trouble. Well he started off badly by 'doubling up' the Liberals silly first home buyers grant - at the worst possible time. This shows that he has no understanding of markets and economics. Now he is deciding to tax the 'super profits' from mining. Basically he has taken all the superlative profits that can come from mining. This is a mistake for several reasons:
1. We want government spending less money than more - why? Because they are so terribly bad at it. e.g. The grant to fund insulation, heat pumps and wind farms. All the grants went to installers, not to the buyers, since the installers simply raises their prices. You might expect it to have reduced installations, as installers thought they could buy a fishing boat with the profits and work just 3 day a week. Great life if you can get it.
2. We want to encourage exploration in Australia. This proposal is going to result in Australian mining companies spending less exploration dollars in Australia. Jobs and mining income will go overseas to African states. Marx would be ground. Rudd isn't even original, since President of Ghana is doing the same thing.
3. We want to encourage risk taking. This is foremost a tax on risk-taking or high risk mineral exploration. Not all mining is the same. Some mineral exploration is marginal, and other exploration is easy. For instance, under Qld there are huge resources of coal. You know its there, you just have to delineate it and prove its economic viability. Gold exploration is not so easy. Even if there is gold, its a long process to prove up, and there is a high risk of failure.

I personally think this is not simply a tax on companies, its punishment upon investors, and its taking profits from mining companies before they sell out equity to Chinese companies for huge gains. I actually have no problem with a resource rent tax if its a user pay tax, but the point is moot when you have so much government largesse, a welfare system that ought not to exist, a justice system which does not function. Giving the government more money is not going to solve these issues. Building a nuclear reactor in parliament house would. Privatising education would help.
If the government wanted to soften the impact of this plan and to retain the revenue its so keen to expropriate from the mining industry, then I suggest it should restrict the tax to certain 'low risk commodities' like coal, iron ore, alumina and oil & gas. Why? Because these industries truly are blessed and are globally strategic.

Other commodities like copper, gold, rare earths, lead, zinc, silver, etc are often marginal propositions. We don't need the government picking winners. I would have more to say if I knew the detail. However let me say that this plan was introduced with no warning. Fascism! Absolute fascism! Where is the logic for introducing this - other than Rudd's opportunistic grab for money. Never trust a bureaucrat in power Australia! Utterly no sense of reality. Same as lawyers. Useless! Utterly useless. Even the libertarian one's who wouldn't know how to defend freedom if their genitalia depended on it.
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Andrew Sheldon www.sheldonthinks.com
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