Resource Super Profit Tax is Super Stupid

By Eco Guy 3:39am 18th June 2010
We look at the Resource Super Profit tax and show why it will not work as advertised.

The Resource Super Profit Tax (RSPT) will not work; simply put any additional taxation put on a business that disadvantages it in a global market, with low barriers to entry, will hurt said taxed business.

Profit is the reward for taking risks..

Resource discovery and delivery is a risky, dangerous and unpredictable business, the current oil spill in the US clearly demonstrates this. Often the returns can be marginal if none existent and suffer from global prices movements that can work against an undertaking being successful. The Australian Government say they are only taxing the very profitable businesses and giving tax breaks to those that are not successful - but people do not go into business to fail, they go into business to make money and profit. Giving them a soft landing is actually rather an insult and is not progressive or forward looking. Bit like admitting the tax will be painful but we are going to kill you in a humane way.

Also, a lot of Australians have an indirect stake in the resource businesses, through savings and retirement funds. The share prices of these companies is based upon the future profits that they will earn - so taxing the profits more will depress long term share prices... The money has to come from somewhere to pay for the dividends..

Why not set things up to encourage the profit to remain..

Seems the government is all stick and no carrot with this tax. What about making it more attractive for the most profitable businesses to invest their profit back into Australia, instead of trying to tax it from them and spend it through the horribly inefficient government bureaucracy?  For instance why not for every $1 spent by a business on schools, roads, housing, etc protect from taxation 50c of their profits? This actually rewards businesses for building communities and maintaining them.  I know the local councils will probably scream and shout - but if there is such a problem why haven't they been able to address it? You also make it a condition of receiving this protection that the said investment in the community is returned to the community within 5 years, this will allow any depreciation to also be considered.

Also if the government was really serious about wanting to balance the books better, why not start with examining the overspending going on with the Schools building program? A prudent business in hard times trims its sails, the government should learn to do the same.

Related Content Tags: taxation

0 star(0.00 out of 5) from 0 ratings. Rate Now!
Stars: 0 1 2 3 4 5 

Follow us on Facebook, click here!
Add Coment

Got a question or comment about this?

Find what you were looking for?.. Not quite what you expected?.. Got a question to ask people?
Share your thoughts and use the form below to post a public comment right on this page.

Simple HTML is supported i.e <b> <i> etc. Excessive inline URL's, spam, ANY ads or swearing is blocked/removed quickly. youtube URL's get embedded.

Posting Terms & Conditions