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Saturday, May 15, 2010
Super Tax - Super Silly?
I was recently in Geraldton - which is a dynamic regional centre about 1 hours flight north of Perth in Western Australia. The town was historically wealthy from grain farming and fishing, but more recently the local economy is booming with the development of a handful of new mining companies and the commitment by industry and government to build a new deep water bulk commodity export port which will be known as Oakagee.
The sunset is looking over a new children's water playground on the foreshore - taken from my hotel balcony. I remember staying at the same hotel ten years ago and trying to go to sleep over the sound of grain trains rumbling through the night along this same foreshore. The town has relocated the railway to a new route behind the town and has created a new beach by trucking thousands of tons of sand to the foreshore - creating a beautiful seaside lifestyle with marinas, coffee shops and apartments. This is wealth from mining and commodities, and the thing I like about Geraldton is that food production is still powering ahead in a complementary way. The locals are developing an integrated economy. And one of Australia's largest wind farm projects is just outside town.
With the financial rumbles in Europe the world is a buzz about Gold as a store of value. This is an article about the "Super Pit" gold mine in the town of Kalgoorlie in Western Australia- which is apparently now one of the largest man made holes in the earth's crust (soon to be 3.6 km long and 650 metres deep) and also one of the world's richest deposits of gold. Australia is the second largest producer of gold in the world after China and in 2009 Australia earned $17.5 billion dollars in revenue from gold sales.
But all this wealth has now attracted the attention of the politicians trying to shore up government revenue streams. Australian politics is currently dominated by the announcement by the Australian government that they intend to introduce a new "super profit" tax on mining companies in Australia. This weekend the Australian mining lobby is running advertisements saying that if the tax is introduced, Australia will have the highest tax regime on resource extraction in the world at 58%. And with an election due in Australia within 6 months or less - the main opposition party has responded by saying that it will abolish the "super tax". The battlelines are drawn and it will be a fascinating contest. But like all things political - the focus is on the short term and the spin.
My view? We have the mineral and energy commodities the world needs now and should develop them in a sensible way - but instead of a super tax (which is fundamentally discriminatory and anti competitive) we should provide global best practice tax and capital investment incentives to attract capital investment into sustainable food, water and energy systems and research and development in these areas.
Look at the example of the Middle East Gulf economies - who know they are running out of energy commodities and are aggressively investing in food, water and sustainable energy assets around the world.
A little town like Geraldton is starting to get its act together - is it too much to hope for our politicians to think past the short term and do the same?