Business News

Rudd's mining tax – the result

| More

by Peter Switzer

I have to take a very early flight to Cairns today but I wanted to hit you with a dramatic observation about the resource super profits tax (RSPT). While I have been away in Shanghai, the Rudd team have gone back to what they know — politics — to battle the mining industry, which is also doing a bit of politicking itself.

My view is that the tax has an effective tax rate that’s too high. For example BHP Billiton’s effective tax rate goes from 43 per cent to 51 per cent, which is crazy. Meanwhile, Trade Minister Simon Crean, who I have a lot of respect for as a trustworthy bloke, told my Sky News Business Channel colleague, David Speers, that Labor won’t change its 40 per cent tax rate. However, that doesn’t rule out changing the formula for the tax, which could bring down the effective tax rate.

That would be smart policy and be a plus for PM Rudd’s leadership and not a negative.

The battle

Now at the moment Labor is trying to make the RSPT a battle between average Australia and big business mining. But most of us have BHP and Rio in out super funds — most fund managers buy our best mining companies — so it’s like the State of Origin with state against state and mate against mate!

Of course, this is crap. We need to get more tax out of our miners, but not a stupid amount, but we can’t penalise our share prices and super funds.

Canada story

I asked Martin Lakos from Macquarie to come on my show and tell us how Canada has been affected by the share and currency sell off. Canada is a good comparison country for us as it sells minerals and its dollar, like ours is seen as a commodity currency.

Since 15 April when many stock markets peaked our S&P/ASX 200 index is down 12.1 per cent and our currency is off around 11 per cent. Now look at Canada’s story. Their stock market is down 5.4 per cent and their dollar is 5.8 per cent weaker!

What a difference and while there could be some other factors to explain some of these differences, the economist and common sense in me tells me that the RSPT has helped slug and mug our share prices and our currency.

And something has to be done about it. The first step is for the Rudd team to wake up and smell the flowers, let’s say the RSPT, which stink and need to be changed!

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Published on: Tuesday, May 25, 2010