Thursday, July 22, 2010

Andrew Forrest rejoins Resource Rent tax opposition

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I am pleased to see that Andrew Forrest has either rejoined or clarified his position with respect to the Resource Rent Tax, however I am suspicious of his support because he has sought arbitrary clarification of his position at the expense of principles. On the one side I understand that he is trying to advance his shareholders interests (i.e. shareholders in Fortescue Metals), but on the other hand, his shareholders are likely to have broader interests. His customers for iron ore also have broader interests. They also want to see all these smaller, less advanced iron ore projects developed, as well as coal projects, since iron ore customers also buy coal.
So herein lies my problem with Andrew Forrest's real position. He and the government are really the ones who solely benefit from his little backyard deal. He has given the government a 'card' to sell in this election, that they were able to reach a deal with the 3 largest miners. My problem with this is that Forrest has court and received favour from the government, and as a result of those actions, some iron ore projects in Australia could face excessively high taxes, whilst he is quarantined from them. This is therefore a form of protectionism. It has established a 'tax barrier to entry' in the market, and it will result in him having the favoured position of rolling out further iron ore production capacity at the expense of others.
Really I would like to see Andrew Forrest repudiate his agreement with the government prior to this election, as well as support the efforts of the Association of Mining and Exploration Companies (AMEC) to disparage the unfairness of this tax. The issues which should be raised in this media campaign are:
1. The desirability of government vs private spending
2. The arbitrary expansion of govt power
3. The arbitrary expropriation of wealth from 'select' shareholders, who need not be even wealthy ones. The smart money might already have left iron ore.
4. The unfairness of the tax - the govt picking winners, Google paying 0.5% tax compared to the mining industry, over 44%.
5. The impact on our credit rating, which will raise interest rates
6. The impact on the economy and jobs
Andrew Sheldon
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