Well said Troy. You explain the situation clearly - in fact, better than either the government or the mining companies. In fact, the lack of clarity about what is being talked about is appalling.

And especially concerning is the statement made that the Australian people deserve a 'Fairer Share' of the profits made by mining companies. No discussion about what a fair share might be. No recognition of the fact that mining companies pay royalties, in WA soon to be 7.5% of REVENUE, which is a very high rate in fact.

No recognition that the activities of a mining company generate public benefits way beyond the simple company tax and royalties paid. For example, much of the revenue gained through mineral sales is applied to covering operating costs. What are operating costs? They are wages and salaries (generating payroll tax and income tax paid by the employees), services (generating GST, company tax, payroll tax from the service companies, and income tax from their employees), supplies (again generating GST, company tax, payroll tax from the companies, and income tax from their employees).

And it doesn't end there. The fact that those employees have jobs means that they buy houses and cars, groceries, furniture, wine and beer and countless other things that drive the economy. They pay rates which are expended on town infrastructure. They travel which keeps airlines going and so on.

Prevent even one new project going ahead, as the Super Tax surely will, and all those jobs, taxes, royalties etc just won't be generated.

Another point where the discussion is confused is the proposition that some commodities generally produce lower profits than others (phosphate, aluminium etc) and therefore should not be subjected to the same high rates of super tax that might apply to the commodities that are seen as more highly profitable. This is a nonsense. Sometimes even these 'boring' commodities face market circumstances whereby very high prices are generated, with correspondingly high profits. Why shouldn't those 'super' profits be subject to the RSPT as well?

Also, why should the mining industry be singled out? Yes, they are using a public asset (the minerals in the ground) for which they are paying a fee (royalties). But many other industries use public assets as well. For example, television companies use TV licenses which are a public asset. Why shouldn't they be subject to a 'super' tax to give the Australian people a 'fairer' share

Having said all that, a well designed RSPT could arguably be applied. However, the design would have to be very different than that currently proposed. The RSPT should be applied only to new projects - don't change the rules for past investment. Second, the RSPT should be an additional tax that is applied AFTER normal company tax is applied to EBITDA. If the AFTER CORPORATE tax NPAT exceeds a defined percentage of EBITDA (say 25%) then arguably a super tax can be justified to apply, at a 40% rate, to the NPAT above that 25% NPAT margin.

But, this tax should be applied to ALL companies, not just mining companies. One way or another, most companies exploit public assets. They should pay too if their returns are very high.

"Prevent even one new project going ahead, as the Super Tax surely will, and all those jobs, taxes, royalties etc just won't be generated."

Rubbish.
The resource still exists. It will eventually be mined generating all those jobs, taxes, royalties AND massive profits to the miners. Probably even more as the prices will have increased.

The greed of these fat cats and the absolute hide they have to cry poor while swimming in their lucre like scrooge mcduck never ceases to amaze and sicken me.

Lets talk sense here, we dig up over tens times what canada does. Please remember this stuff is in the ground, it's not like a manufactoring plant that can be moved offshore. The whorld Iron ores reserves will run out in about 60 years it is estimated by current know reserves and growth. there will be no super Tax then lets get max benifit for aussie now.

Troy, firstly your profit and loss statements are really much too simplistic, we both know that taxes and their compilation are much more complcated than your examples. Nevertheless, to prove your point that you as an investor will certainly be disadvantaged by the application of this so called super tax you have presented this simplistic comparison with a Canadian government tax. My advice is, if you are not happy, then sell your mining shares and invest in property.
Mining in Australia since the great depression days when gold miners greatly assisted the recovery, tax wise, has led a charmed life, most emphatically so compared with the rest of the tax paying population. Its well past the time the miners paid there fair share.
Mining like farming is a way of life, when subsidies were removed from farmers they also screamed they would go broke, never happened.
Similarly the miners, they also will not go broke, neither will mining investors.
As the Treasurer states: the minerals in the ground belong to all the people of Australia, they the general public are the landlords and if the mining tenants cannot or won't pay the charged rent, so be it, the minerals in the ground are not perishable and if not mined this year will still be there to be profitably mined in the coming years. They can only be sold once!

The first problem with this new tax, is that it shows that our
present politicians have less integrity then a common hooker.

For they have been pleading and cajouling miners into investing
in large megaprojects. Now that miners have spent their money,
Govt changes the rules.

At least the common hooker tells you up front what its going to
cost you and usually sticks to her word. Not so with our
present bunch of politicians.

Troy, in my view your are one the money. It is the future projects a that are at risk, as the current projects have to be completed as they (the miners) have simply come to far to stop now.

Yabby also make a point I have raised before in that the government has no right to demand more now, given the fact that they sat back and watched the miners spend billions locating the minerals, assessing thier values and deciding to go ahead.

There is no doubt that the people own the minerals, but, if the people want more of the rewards, then the people must contribute to the production.

As it stands, the government wants a larger slice of the pie, but without any risk attached.

Like any business, if you want to be a silent partner, you must contribute finacially, and it is here that the government has got it wrong.

However, if the government wants to invest in mining, then by all means share in the profits, but, they must also be prepared to share in the losses.

Governments, like economists, are mostly made up of uni graduates that have rarely taken a finacial risk in thier lives.

Furthermore, they are not 'risk takers' or 'job creators' and it would appear that thier supporters are in the same boat.

Using the same logic of the Mining Companies (and it's only the big transnationals that seem to be complaining)- if we CUT the amount of tax they pay, then most of our goods would become cheaper and our Superannuation Funds would soar in value.

Maybe we should just take away all the concessions they get instead.

A profit is still a profit. Even 60% of something is better than 100% of nothing at all.

If they aren't interested any more they should hand back their leases so they can be given to somebody else.

So what if they change the tax rules? The government changes things for me every Budget time.

Great article Troy. Although your tax analysis is obviously simplistic, it gives a far more realistic and relevent assessment than that put forward by Treasury and Wayne Swan.

I find it appauling that senior public official can so blatantly make false or misleeding claims about mining companies. BHP and Rio Tinto have responded in depth showing their tax rates are already far higher than the 13-17% claimed by Treasury and Mr Swan.

The issue has now become one of integrity. The government and Treasury don't have any.

Listening to treasury boss Dr Hennery, he comes across, to me, as one of those business hating academic public servents. You know the type, a few Communistic tendances showing. Most definately a distinct animosity towards business surfacing at the press conference.

No doubt he believes that those nasty miners should be happy to give up their proffits to those nice a academics, & public servants, they are the established elite, after all.

Any of you who think there are not plenty of mining opportunities in places other than Australia are just, kidding themselves. If Rudd stays with his ambit claim, there won't be any reason for companies to open new mines in Oz.

It does sound as if, as usual, he is going to water, & stepping back a bit. Why, oh why did the idiot not think for a few minutes, before shooting his mouth off.

*So what if they change the tax rules? The government changes things for me every Budget time.*

Err Wobbles, there is a bit of a difference. Frankly, the 3$ tax
that you pay does not really matter and you live here. But when
billions of $ are involved and overseas and local investors are
pleaded with, begged and encouraged to invest in Australia, as
the Govt is reliable and x is how much tax will be paid, only
then to change their minds, because investors were foolish enough
to trust them, it comes down to our pollies having less integrity
then your average hooker, who at least keeps her word about her
charges.

It does sound as if, as usual, he is going to water, & stepping back a bit. Why, oh why did the idiot not think for a few minutes, before shooting his mouth off.Posted by Hasbeen

Yes I think he is 'S' scared, as the last thing he wants is another addition to the 'failed trophy' case.

Still he plays cat and mouse with the voters, hoping for TA to trip so he can call an election.

As I have said before, he simply lacks balls!

As in the words of the Rio CEO, Either Swan is deliberately misrepresenting the information to the public or he is grossly incompetent.

As the figures given in the article have independently audited, I would say that both are true.

Yabby,
Now that you mention it, remember that most of the profit from those Transnational companies is going directly offshore to their overseas owners and not doing much for this country at all.

As for the investment, it's only being made with a view to making a return, not some act of generosity on their behalf.

A profit is still a profit and it's only excess profit that is subject to this tax.

The Mineral Council actually suggested this tax themselves some time ago because it would give them benefits once the boom ends.

Wobbles, as it happens, most of the profits from mining companies
have gone back into new developments, for they cost billions.
Without investment, you have nothing. Was that you saying that
you actually need a job? Somebody has to invest their savings
for that to happen.

And yes, they would like a return. Just as you want a return for
your labour, or your savings.

*A profit is still a profit and it's only excess profit that is subject to this tax.*

All profit is already subject to tax, in BHPs case, 43% of net
profits. I put it to you that when Govts want more then
half, like two thirds in this case, its not tax but thuggery.

Wobbles, while the returns on mining may seem huge (now), it is the risk in making such a return that is also huge.

I say again, the government, and the people for that matter, should only be entitiled to additional profits if they are also willing to share in the risks.

And remember, without miners, these minerals are vertually worthless to both the government and the people, however, if the government were to locate the deposits, leaving the miners with the task of simply extracting them, then I doubt they would mind parting with the profits.

Maybe this should be considered in the future. In the mean time it is unfair to expect more now simply because the miners have 'struck gold', as before they found it, it was only dirt.

You guys aren't being fair on the Labor government.
Rudd has been much more efficient at turning around the multi-billion dollar surplus that he inherited than Howard was in turning around the multi-billion dollar deficit he inherited.
Howard took nearly a decade to achieve his objective,
whereas Rudd reached his goal in just a few years.

As a point of political interest:

In the great depression of the 20th century conservative governments in Britain, Australia, USA, all used the same recipe to contain or solve the financial depression, restrict government spending, dampen down the economy, slow down/cease bank loans.

These measures all resulted in, as is well known, massive unemployment, extreme poverty. A war, with its consequent massive government spending, was required to eventually solve the problem.

The Rudd government in the present financial depression increased government spending which, no matter how it is so badly/quite unfairly represented today, very quickly solved the problem.

The Howard/Costello partnership no doubt squirreled away a huge surplus but at what cost to the community infrastructure?

No government should have massive surpluses. Good government should aim for a minor negative balance.

I think there is a lot of hysterical misplaced angst about this tax. Of course the miners are going to scream; they want the most profitable deal they can get. I find it amusing that two of the miners complaining loudly (ones in which I have shares) have yet to declare a profit or to post a dividend. I would rate their squeals more if they were likely to pay the super profits tax in the near future.

Remember there is nothing particularly noble about mining companies despite the economic benefits they claim to provide and if the current lot go, there will be those willing to take their place.

Well written fancynancy.
I also have bought mining shares in past years when I was young and foolish, not iron ore, coal, or gas, I might add, but little flutters on other metals. Must say I made more money from bank term deposits.

Quite a lot of miners out there will never make a profit so the super profits tax will never affect them.

I believe it can be safely stated that it will never directly affect the ordinary Australian working family, that is by directly applying the tax to their income, but of course will impinge indirectly on their finances by increased savings on their superannuation and by other infrastructure benefits.

The SPT would appear to be aimed at the huge conglomerates whose mining activities are on a world scale. A loss in a mine in this country is offset by a profit on a mine in that country, with really no other connection apart from the profit motive.