From the BBC profile of the Australian mining heiress who is rich enough to topple governments if they threaten her with LVT:
When her father, Lang Hancock, discovered one of the world's biggest reserves in the early 1950s, the export of iron ore was banned in Australia because it was deemed such a scarce and finite resource. Tens of thousands of iron ore shipments later, royalty payments from that Pilbara mining field in Western Australia continue to swell her coffers.
The Hancocks were not the sole beneficiaries. The multi-billionaire fervently believes that her father's discovery also made Australia prosperous, which partly drives her recent quest for influence, gratitude and respect... She hates being called a mining heiress because she considers herself a self-made businesswoman who turned her company around after her father's death in 1992.
I trust that the inherent contradictions in all that are blindingly obvious.
FFS!
56 minutes ago
18 comments:
Not exactly on-topic but look what popped up in my Facebook feed from the LSE:
http://www2.lse.ac.uk/newsAndMedia/news/archives/2012/07/conservation.aspx
"I trust that the inherent contradictions in all that are blindingly obvious."
Not to me they're not.
RA, interesting.
B, prospecting is a tricky business, involves skill, work, capital, risk and so on, for which prospectors have to be paid. But the prospector does not create the iron ore, it's just there, it's a free gift of nature. If he hadn't discovered it, then sure as heck somebody else would have done.
To go from this to accepting that this fat cow deserves to accrue a large chunk of Australian income, and to dictate Australian tax and economic policies for the next few centuries eternity is a bit of a leap, isn't it?
The sad thing is that she's already managed to scupper the Henry review, a very sensible LVT-friendly tax review which was carried out for the Aussie government a few years ago. She didn't like the proposal to up the royalties she had to pay on ore extracted.
She hates being called a mining heiress because she considers herself a self-made businesswoman who turned her company around after her father's death in 1992.
It may be that she's actually done good business decisions in the field of iron mining, but without knowing who she is, I still bet a tenner that the main thrust of her turning the company around is using the rentier income to buy new sources of rentier income, new mining rights and urban property most likely.
Well, most governments cover the "mining company didn't create the minerals" bit by charging royalties on the minerals, which is a sort of LVT. So as well as paying all the taxes that large companies pay, mining companies pay extra tax for the minerals they extract, so in fact they contribute a lot more to state coffers than most other companies and there is no doubt that Australia, as a country, has done very well out of selling iron ore to China. However, the same amount of money would have flowed into state coffers whoever was responsible for pulling the stuff out of the ground, so the "fat cow" can't claim personal responsibility. However, she is not so much "accruing a large chunk of Australian income" as accruing a small chunk of a stupendously large income, but that's the way mining goes: strike it lucky and you're rich, unlucky and you go bust.
"She didn't like the proposal to up the royalties she had to pay on ore extracted."
Well are you surprised?
Hardly.
B: "mining companies pay extra tax for the minerals they extract, so in fact they contribute a lot more to state coffers than most other companies"
Obviously the mining companies have contributed nowhere near enough, see Kj's comment.
"Australia, as a country, has done very well out of selling iron ore to China"
Well it could have done a lot better. I have read plenty of articles saying that the resulting high exchange rate has more or less done for non-mining companies. It's like the "curse of oil".
Mark,
OT but I thought you'd like it....
http://www.youtube.com/watch?v=1_nuKzNuV-Y
CR.
MW wrote: Well it could have done a lot better. I have read plenty of articles saying that the resulting high exchange rate has more or less done for non-mining companies. It's like the "curse of oil".
Exactly. It's a common problem for resource-rich countries, no matter what the resource might be. So common that there's a name for it -- the Dutch Disease. There are a couple of possible treatments. A combination of LVT and Resource Royalties is one of them. Using the earnings for foreign investment by a Sovereign Wealth Fund is another.
D, yes, call it Dutch Disease or "the curse of oil", call it LVT or resource royalties. Apparently this is part of what did for UK manufacturing in the 1980s, and Norway is one of the few countries which appears to have got this right.
Maybe Kj can confirm or dispel this, his problem is that the Norwegians can't grasp that what goes for North Sea oil goes for all land rents :-(
MW: confirmed, probably 'cause they don't have poor widows on any of the oil installations, yet.
"Obviously the mining companies have contributed nowhere near enough"
Well what constitutes "enough" is very much a matter of opinion. I dare say, politics being what it is, that higher royalty payments could have been agreed on at the start and it would have still been worthwhile mining the stuff.
"She hates being called a mining heiress"
Well, she isn't, is she, she's a royalty farmer ("royalty payments from that Pilbara mining field in Western Australia continue to swell her coffers"). She, or her company, isn't actually doing any mining, it appears.
"Well it could have done a lot better. I have read plenty of articles saying that the resulting high exchange rate has more or less done for non-mining companies. "
Politicians mismanage millions from mineral extractions; so, what else is new? Just because the pols have pissed it away doesn't negate the fact that the income was there in the first place. Who's to say, that if they had succeeded in raising the royalty payments on the iron ore, they wouldn't have pissed that money away, too.
B: "Who's to say, that if they had succeeded in raising the royalty payments on the iron ore, they wouldn't have pissed that money away, too?"
Fair point, the UK govt pissed away the North Sea income, but the Norwegian govt didn't, and the Australian govt, almost unique among Western nations, has a good record of running small surpluses and small deficits in equal measure. By our standards, they are a paragon of virtue and thrift.
"Australian govt, almost unique among Western nations, has a good record of running small surpluses and small deficits in equal measure"
Perhaps because they are geographically an eastern nation.
B, I doubt it, some Asian-Oriental countries are spendthrift and corrupt, others are very sensible. You can't generalise.
Bayard:
Well what constitutes "enough" is very much a matter of opinion. I dare say, politics being what it is, that higher royalty payments could have been agreed on at the start and it would have still been worthwhile mining the stuff.
Experience shows that the peak of the laffer curve on taxes on resource extraction is pretty high (depending of the margins of the business ofcourse), which implies that mining/oil companies will still gladly extract oil and minerals.
I've superficially read up on the whole mining tax business, and it seems that it's basically a swap from paying royalties to adding a 40% surtax on profits above 6% of capital costs (in addition to the regular CT-rate). Which means that in the initial years, they can avoid paying royalties up front, and pay CT+surtax when they are in the green. Seems like a generous deal to me, oil-extraction surtaxes here and in the arab countries approach 80% without any problems.
Kj, in practice, a high CT rate like 80% and (being entirely fair) a full first year write off of the costs of actual investment in rigs and pipelines and stuff seems to work.
The cleverer way of doing it would be for the state to retain ownership of the land-resources and merely pay companies to extract stuff. So the sales proceeds go to "the nation", which then pays the oil company $20 or $30 (or whatever agreed figure) to cover its actual costs per barrel extracted plus reasonable profit margin.
So instead of oil companies bidding for extraction licences (and taking all the risk), the govt would sub-contract the extraction to whichever company is prepared to do it cheapest (assuming certain minimum safety and environmental standards).
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