To tax or not to tax!

Despite the optimistic nonsense coming out of the Government in Canberra, and the shrill response of the opposition and mining industry, we need to consider the proposed new mining tax in a wider context.

I am not an economist, so perhaps am not trained to come up with sage explanations about why what happened in the past did not comply with my predictions,  but is seems to me that in a global context, at some point the financial music will stop, and the piper will have to be paid the bill for decades of public sector overspending in most developed economies. At that time, the money will not be there, as Greece is finding, and I suspect Spain is about to discover, and so the solutions are pretty painful, savage reduction of immediate spending, and substantial increases in taxation, which in some economies will need to be draconian to address the debt.

In this country, we have been partially insulated by the demand for resources. However, the source of debt finance for the rest of the world has been the trading  surpluses of our resource export customers, and at some point they will stop lending, and at that time, their demand for our resources will drop substantially. That is when the do-do will hit the political fan, so it appears better to start to claw back public costs, and increase public revenues in ways that will ease the pain that will otherwise come.

Charging a premium for the once only use of Australia’s natural resources over and above corporate tax rates appears to be a pretty good option to me, and has been successfully done in petroleum, and by way of the Federal Resources Rent Tax (which was going to end the world when proposed, according to the industry), and the poorly managed state based mining royalty systems.

Clearly (to me at least) the extension of the resources rent tax in some form to mining is a very good way of addressing the financial molehills we have before they become the mountains Greece has built as it is morally and economically defensible. Pity the Government has so abjectly failed to sell it, and the political opposition and mining industry response has been so successful in the short term, to our long term cost.

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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