This is different from your first post. So essentially you are...

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    This is different from your first post. So essentially you are talking about thin capitalisation and debt/ equity ratios. The safeharbour used to be 75% debt to equity, but was changed on 1 July 2014 to 60%. Labor has put up a proposal that the debt/equity ratio for allowable interest claims should be equivilant to a company groups entire global operations (i.e. you have a debt/equity ratio in Australia of 60% but a global average of 30%. you only get a deduction for 30% of interest in Australia). I have problems with this, but as you mentioned a reduced company tax rate may make the miners happy to accept change. My objections have more to do with structuring and asset protection issues, but not relevant here. Here is an article on this: http://www.lowtax.net/g/news/Australian_Miners_Critical_Of_Labors_Thin_Cap_Plans____67440.html

    Now it is up to the States to charge a royalty they think fair for the minerals. The minerals onshore are property of the States not the Commonwealth. Some States use variations of fixed price and/or market value royalties. It is incumbent on those States to charge a "fair" price for the inground resource for the benefitof their State budgets. Now the Commonwelth does have power to levy import and export duties, but if the States get a "fair" price I doubt that gives the Commonwelth much latitude in a competitive market.

    To my mind, mining cycles have always been cyclical. When we argued the mining tax here, myself and others argued it was mad to base recurrent expenditure on cyclical income. Further, I think we dogged a bullet with the first mining tax proposal. Imagine trying to cover the losses now of the miners who are, or will fail if conditions continue.

    BHP & RIO are very efficient iron or producers with high quality deposits. In a low price environment you need to move volume. Keeping prices artificially high would encourage owners of non-dometic operations (e.g in Africa and South America)to develop and add more competition to the depressed market. RIO & BHP do what they do for their future and the circumstances facing them and their industry. Better our iron ore being sold in volume than sommeoneelse's to my mind.

    Cheers
 
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