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Miners, charity and corporate tax

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stui magpie Gemini

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Joined: 03 May 2005
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PostPosted: Thu Nov 10, 2022 4:55 pm
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watt price tully wrote:
stui magpie wrote:
watt price tully wrote:


That is not an ideological opinion at all:


Yes it is.

Quote:


any clear thinking on this subject knows that the mining, fossil fuel companies etc have had the Government in their pocket through their lobby groups such as the Minerals council etc Indeed Gina’s mate the beetrooter up North let alone Canavan actively do their bidding.


That's also an ideological opinion. There's so many lobbyists in Canberra, if you tripped and fell over on the street you'd likely fall on 3 of them. Lobbying isn't a crime although it's not something I personally like.

Give me a factual reason why mining should pay more company tax than other companies.


They should pay super profits tax. The mining lobbyists are well over represented as are the fossil fuel lobbyists in Canberra. That’s well known; who else can afford them to that extent?

The issue when you use the word “ideological” is simply a label; it is equally ideological to say yeah the status quo is how it should be. We are then all ideological.


I disagree, saying that the status quo should remain in the absence of a factual, evidenced reason for change, isn't an ideological position.

I'm not ideologically opposed to any company paying a higher rate of tax than others, provided there is valid justification for it, which 'Im yet to see.

At present, if they make lots of profits, they pay more tax anyway, 30% of their profit.

If you want to take aim at an industry that adds little value to society (unlike mining which is essential), have a go at Banking.

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David Libra

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PostPosted: Fri Nov 18, 2022 9:17 am
Post subject: Miners, charity and corporate taxReply with quote

<Split from "Russian invasion of Ukraine" thread>

stui magpie wrote:
https://www.theage.com.au/world/europe/andrew-forrest-s-740-million-bet-on-ukraine-20221116-p5byx4.html

But....he's in mining, he should pay more tax?


Well, yes.

https://amp.theguardian.com/commentisfree/2017/may/24/twiggy-forrests-philanthropy-is-great-but-he-could-have-just-paid-more-tax

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Last edited by David on Fri Nov 18, 2022 2:24 pm; edited 3 times in total
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stui magpie Gemini

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PostPosted: Fri Nov 18, 2022 10:29 am
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Laughing Laughing Laughing
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What'sinaname Libra



Joined: 29 May 2010
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PostPosted: Fri Nov 18, 2022 1:38 pm
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David wrote:
Well, yes.

https://amp.theguardian.com/commentisfree/2017/may/24/twiggy-forrests-philanthropy-is-great-but-he-could-have-just-paid-more-tax


What, is the $2.9b they paid in 19-20 not enough?
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David Libra

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PostPosted: Fri Nov 18, 2022 2:06 pm
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Nope, not from $40b+ income ($20b of which is "taxable", i.e. has not been written off in some way). Have a look at where the red bar is for Fortescue and other big mining companies on the graph in the article below (actually $5.8b tax paid for the last financial year, which is still far too little):

https://www.smh.com.au/politics/federal/the-companies-that-made-the-most-money-and-paid-the-most-tax-20221103-p5bv6e.html

Not saying his company is necessarily tax-dodging – other than in the entirely legal, commonly practised sense – just that the rate should be raised (to 1980s levels, ideally; see here for a damning report on the failure of Australian company tax cuts over the last few decades to achieve what was promised: https://australiainstitute.org.au/post/the-3-key-arguments-for-the-company-tax-cut-make-no-economic-sense-heres-why/). Resurrecting the abandoned mining tax would be a good place to start.

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What'sinaname Libra



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PostPosted: Fri Nov 18, 2022 3:02 pm
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Um, FMG has $29b in income. Deduct expenses, they had $19b in taxable income and then paid $5.8b in tax, which is 30%.

Do you not expect FMG to have expenses to make $29b in sales, like wages and the costs to extract iron ore?

Compare to Woolies, $49b in income, and only $2.4b in taxable income. Did they "write off" $46.6b?

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David Libra

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PostPosted: Fri Nov 18, 2022 4:21 pm
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We all know that companies do what they can to minimise taxable income. Some of it reflects normal and unavoidable costs, others are the result of (perfectly legal) accounting tricks and moving money around – including the oldest scheme in the book, charitable foundations. Everyone does it.

Even if that process were entirely legitimate and scrupulously fair, I've often wondered why companies are essentially taxed on profit and not income, whereas you and I pay tax on everything we earn (we don't get to deduct rent and food from my taxable income, for instance) ... but perhaps that's a question for another time.

However you slice it, the bottom line is that 30% is too low. In the mid 1980s, the company tax rate here was just shy of 50%. But since then, there's been a global race to the bottom, which has been great news for big corporations but not so great for the rest of us (as cost of living rises, wages and social support remain low and the financial system collapses in on itself). There's an optimal level to be found, for sure, and you don't want to disincentivise production, but it seems pretty clear to me that there's considerable slack in the current system and that these companies could be on a much tighter leash. It's not like the big miners are going to pack up and go elsewhere if we don't give them mates rates; it's far too lucrative an industry.

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stui magpie Gemini

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PostPosted: Fri Nov 18, 2022 7:09 pm
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Quote:
Even if that process were entirely legitimate and scrupulously fair, I've often wondered why companies are essentially taxed on profit and not income, whereas you and I pay tax on everything we earn (we don't get to deduct rent and food from my taxable income, for instance) ... but perhaps that's a question for another time.


Simple answer, expenses, and staff salaries are usually the largest component.

Use Woolies below as an example. Supermarkets rely on small margin. high turnover. They pay a fuckload of staff, pay for real estate and utilities and pay for the products they sell with small profit levels on each item.

Tax them on their income rather than their profit and they're bankrupt immediately, as are most businesses small and large. You just killed all retail businesses.

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What'sinaname Libra



Joined: 29 May 2010
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PostPosted: Fri Nov 18, 2022 7:40 pm
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That's OK, under David's new regime, Woolies marks up the price of food 30% to account for the tax paid on sales income.

Everyone's a winner
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What'sinaname Libra



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PostPosted: Fri Nov 18, 2022 7:53 pm
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David wrote:

Even if that process were entirely legitimate and scrupulously fair, I've often wondered why companies are essentially taxed on profit and not income, whereas you and I pay tax on everything we earn (we don't get to deduct rent and food from my taxable income, for instance) ... but perhaps that's a question for another time.


But you do. You get to deduct the costs in earning your income and are taxed on the residual profit. Just like a business.

If you were a plumber, you'd get to deduct all the costs in buying pipes, taps, etc
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David Libra

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PostPosted: Fri Nov 18, 2022 9:51 pm
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You’re confusing business deductions with personal income, no? I get to make deductions on certain work-related expenses as a sole trader with an ABN – i.e. literally a small business – but I don’t get to do that for my 9-to-5 office job. In that capacity, I very much am taxed on income, not profit; how much I spend on essentials on a day-to-day basis and how much I have left over has no bearing on what I pay. So rather than asking why companies pay tax on profits (and a flat rate, at that – there are many variables here that we’re taking for granted), we might just as well flip the question around and ask why that paradigm isn’t the one that’s universal.

Anyway, as I said, this is a bit of a detour and doesn’t deal with the substance of my post, which already accepts that dichotomy for the sake of the argument. The real question is why we’ve allowed the corporate tax rate to fall so low while infrastructure and essential social services are underfunded and unemployment benefits remain so stingy.

I can’t help but feel like 1980s Thatcherite/Reaganite neoliberal economics is what got us to this point and that it’s just about run out of steam. We’re no wealthier now than we were then, and in many ways things have gotten worse (consider the housing market, real cost of living, etc.). The decrease in company tax rates has helped fill Forrest and Rinehart’s pockets and allowed the banks and other multinationals to prosper (while plenty like the big tech companies pay little to nothing at all), so why hasn’t it benefited the rest of us in any meaningful way?

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What'sinaname Libra



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PostPosted: Sat Nov 19, 2022 8:12 am
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No, I am not confusing anything. No matter what, you get to deduct expenses incurred in earning income. It's just that in earning your 9-5 income, you don't incur many expenses at all. You have a greater gross profit margin (and ultimately net profit margin)

Also, personal income tax rates have fallen too. They were 60%.

You say people haven't benefitted. The biggest beneficiaries of company profits are super funds, including industry super funds. That profit that the banks makes is distributed as dividends to these super funds.

Cost of living is still below what it was during the 70s, 80s and 90s and even still below GFC levels. For most of the 2010's, wages grew by more than inflation.

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stui magpie Gemini

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PostPosted: Sat Nov 19, 2022 5:22 pm
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You can't tax a company on income. Consider NFP's.

Use Public Health as an example. When I worked at Eastern Health, the salary and wages bill was around $600k pa, other expenses around $400k making it a Billion dollar enterprise. To pay those expenses, they clearly need to make $1B in Income. If you taxed that income, the only option is to reduce services. If they reduce services, they get less income.

People who work 9-5 as an employee are able to claim work related deductions, but not their day to day living expenses. Paying wages to staff is just one of many legitimate expenses that companies need to spend in order to make revenue.

Why is company tax at 30%? There's no right or wrong rate, but you need to set a rate that encourages investment and people setting up companies here, having higher company tax rates than other countries is a deterrent to investment.

The companies pay wages which people pay tax on and GST when they spend it, the companies also pay GST, Payroll tax, Super, Workcover insurance premiums, etc etc.

Maybe Governments should be looking at where they spend their money and whether the legions of public servants are really needed.

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pietillidie 



Joined: 07 Jan 2005


PostPosted: Sun Nov 20, 2022 7:11 pm
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stui magpie wrote:
Maybe Governments should be looking at where they spend their money and whether the legions of public servants are really needed.

That's a throwaway line though, disproven in study after study. Government is no more wasteful than most companies in the private sector, and some are more productive and some less. Cuts and purges come and go in each over time.

And that's before we even get to the fact the services being delivered are essential, and subject to the strictest ethical standards and far higher scrutiny than private companies. As it should be, but we all know that private companies delivering the same services almost always do worse (which is not to say transition to private delivery shouldn't take place where superior, but we all know in current advanced economies the error is far more often dumb privatisation than it is dumb nationalisation - see American healthcare).

The valid argument you mention is the one concerning international competition and capital flight. There is a point where conditions become so onerous investment flees. Hence, the current negotiations on a global minimum corporate tax rate, which is a far better solution than far-left/far-right protectionism.

But even a tax rate only has meaning in context; i.e., it can be higher and companies still won't flee if the higher rates are reflected in accompanying capital advantages, such as human capital and infrastructure.

And of course this exactly why mining can and should be taxed right up to the capital flight ceiling, given its externalities are extremely high and its capital overflows extremely low. That is, a dollar both produced by and spent on almost any other industry you care to name is more valuable to the nation than one spent in mining because its multipliers are so low.

Mining notoriously redirects infrastructure spending to itself for very little aggregate benefit to other industries; mis-locates people; mis-trains people; and IIRC has a really bad capital-to-employment ratio. Add that to its distortionary capture of politics and legislation (remember fruitcake Abbott's attacks on green energy technology?), and massively high externalities, and Australia is ridiculously ignoring the opportunity cost.

People have to somehow escape the old dichotomy between left and right. The thing that makes capitalism so productive is competition. Nothing else. By definition, that makes high-rent industries the absolutely worst focal point for any economy except in the earliest stages of development. Pretty much the entirety of economics is devoted to this very point, and it's about the only thing upon which every single economist agrees. (Hence, my policy focus is on competition, and specifically quality of competition, including helping people to better compete, making us all wealthier).

As with the science of global warming, none of this is controversial except to those so invested they have cornered themselves into being unable to maintain reason and diligence (see the internet crazies who spend and night devising deflections instead of facing the knowns, grasping the nettle, and rebalancing their portfolio). Think of all the hours people spent feverishly being wrong about things like Iraq, global warming denial, Trump, Brexit and on, scuppering sensible decision making.

(Part of ethics that is underrated, in my view, is maintaining agility, i.e., avoiding getting locked in to having to defend destructive positions, whether by investing in the wrong industry, clinging to some organisation or party, building a career in the wrong industry, or refusing to adjust when the writing is on the wall. It's endlessly frustrating watching people dig in and make everyone else pay while they cling to outdated nonsense. Admit error early and often, in my model, before getting locked in).

Mining is clearly an essential economic activity. But it's not a winning focal point for an economy beyond that essentiality except and/or until whatever resources are subject to proper competition and are costed accordingly. (This might happen sooner than expected if we harness energy more safely and companies start making their own 'energy appliances').

No economist ever wrote:
"Let's transition from an advanced economy to a natural resources economy".

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What'sinaname Libra



Joined: 29 May 2010
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PostPosted: Mon Nov 21, 2022 8:01 pm
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^ get your head out of textbooks and in to the real world

The countries with highest GDP per capita do so through two means - mining or tax incentives.

Ireland, Luxembourg, Switzerland, Singapore
Norway, Australia, Qatar, Iceland

The exception is the USA.

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