Wednesday, June 02, 2010
Surely not 400 per cent per year
In a Senate estimates hearing the Treasury's lead negotiator with mining companies last night held out hope of exempting sand and gravel and building products from the resources tax saying it had never been expected they would pay the tax.
"In a large measure their prices are set in competitive markets and you wouldn't expect significant rents, David Parker told the committee. "The government said as a starting point for consultation it would be taken that they were in but it was happy for them to drop out if their administrative issues outweighed the social benefit."
"Some of those commodities would actually be better off under the proposed arrangement because they pay royalties which would no longer be paid under the RSPT."
The average profit in the mining sector was 37.1 per cent compared to 11.4 per cent for the economy as a whole.
But some projects had "extraordinarily high returns"...
"Some of the projects we have looked at while going through the consultation process have a pay back period of less than six months and an internal rate of return in excess of 400 per cent."
Treasury official Michael Willcock said the a announcement of the mining tax had so far had only a tiny impact on investment returns amounting to 0.35 per cent of the value of a balanced super fund.
Officials confirmed that the concept of a resources rent tax was market-tested by a research company in April before the government decided in May to announce it as a policy.
The research had uncovered "a low level of community engagement with tax" suggesting an advertising campaign would be necessary.
Tax Office second commissioner Jenny Granger said an assistant tax commissioner was already working full-time on the transition to a resource super profits tax.
Published in today's Age
. How much tax?
. "The person who will dig out our last iron ore has probably already been born"
. Henry: "Frankly there is more than enough investment in train in the mining sector