Political Logic – If we increase the taxes on cigarettes by a considerable amount it will stop people smoking however if we do the same to resources it will have no effect. Only politicians can think like that.
I will try to condense this subject to its core elements by sharing the following thoughts with you.
The proposed Super Resources Tax is too much too quickly and if our government does not revise the plan and take this into account unnecessary negative factors will be generated.
While the tax itself could be considered to have some merits it does not take into consideration.
1 Companies produce financial models for each project taking into consideration as many factors as possible (Tax is one of them) before raising the finance and commissioning the project. If a new tax is proposed prior to a project being commissioned then this can form part of the evaluation process.
2 When projects are already under way and then a new tax such as is proposed by our government is implemented it can have serious negative implications for the company its shareholders and staff. One of the quickest ways to reduce costs is to shed staff just as we have seen in the reaction to the Global Financial Crisis.
3 Global companies have global opportunities and many emerging countries would love to have the resource industry that Australia currently has.
4 International finance is very mobile and flows in the direction of where it can gain for its owners the greatest return on their investment.
5 Profitable companies provide the government with other sources of income A- they pay tax on their profits B- Their staff pay income tax on their earnings C- Associated companies and their staff also pay taxes.
Our government should leave their immense egos at home and sit down with the resource based companies and negotiate a mutually acceptable outcome for all our sakes.
KME
